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Water firms have said that unless they are allowed to boost bills the government will not hit its target of building 1.5 million homes over the next five years.
The water industry is asking for bills to rise by £26 a year, for five years from 2025, rather than the £19 a year proposed by Ofwat last month.
Firms have until noon today to submit their responses to the regulator’s plans.
Ofwat says its rise provides UK water firms with a record £88bn of investment over the next five years, of which £35bn should be used “to reduce pollution, improve customer service, river and bathing water quality and deliver greater resilience to the impact of climate change”.
But Water UK chief executive David Henderson argued that this rise is not enough to secure infrastructure upgrades to UK needs to deliver on the country’s ambitious housebuilding targets, on BBC Radio’s Today programme.
Henderson said: “Unless we get that full investment amount we are not going to be able to secure economic growth, we are not going to be able to build the £1.5 million homes that we desperately need and we are not going to be able to end the sewage flowing into our seas.”
Data shows that water firms have paid out £2.5bn in dividends to investors over the previous two years, while several companies in the sector have failed to meet regulatory standards over leaks and sewage releases.
But Henderson called this “a drop in the ocean”.
He said: “If you want investors to put their money into the UK you need to see a return.”
“We are not allowing our system and economy to grow as it should because of a lack of water. Arguing about dividends is not going to solve the problems we have for the future”
The head of the trade body added that investors can currently make greater returns from banking and the energy sector.
But Ofwat chief executive David Black has said: “Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.
The UK’s largest water business Thames Water is fighting to avoid a government-handled administration as a result of its £15.2bn debt pile.
The firm has faced sustained criticism over sewage dumps, leaky pipes and extracted dividends – while in March its existing shareholders U-turned on a plan to invest £500m in the business as an emergency measure.
The Labour government plans to build 1.5 million new homes over the next years as part of its plans to kickstart the UK economy. Over the last five years to country built around 1 million homes.