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Ofwat set to push ahead with price reductions

The water watchdog, Ofwat, is set to push ahead with price reductions across the water sector in what is being seen as a significant victory for UK consumers and UK businesses. While initially it was believed the average water bill would increase by £31 a year before inflation, the regulator surprised the industry somewhat with calls for a 4% reduction in prices before inflation (which equates to around £14 per customer). So what next?

While a reduction in water charges across the UK would be welcomed by UK consumers and UK businesses there is concern amongst unions that at a reduced investment return for water companies could result in significant job losses. For many years the water companies have been seen as a "stable investment" showing year-on-year growth in prices although it seems that they have become a target of the water regulator.

As with so many perceived customer and business victories against the various utility companies, this one could be fairly hollow again because of the potential job losses it may cause. Some analysts are suggesting that investors in the stock market may well reappraise their positions and their forecasts for the water companies going forward with some appearing to turn negative. As ever, professional financial advice should be sought if you are considering any investment decisions.

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