Recommendation 23

First Economics told us that financial resilience depends on having confidence that financial markets will supply water companies with new debt and equity.73 Ofwat estimates companies will need around £12 billion in new equity over the next five years to support their spending plans.74 Ofwat told us that companies had raised £5 billion in equity over the last five years. It also acknowledged that some companies are facing challenges in raising investment.75 Both equity and debt investors require a return for their investment allowing for the risk associated with the investment. Ofwat has also increased the level of returns for investors over the next five years which is covered by customer bills.76 The Consumer Council for Water told us that a low-risk, low-return environment was needed, and First Economics confirmed that this would be one way to bring bills down.77