Small businesses face a 6.4 per cent hike to their dual water and wastewater bills, confirmed Ofwat, after it revealed its final decision on retail price caps.
Ofwat hope the change in price cap rates will enable efficient retailers to earn a fair return, while supporting the long-term stability of the business retail market that will benefit customers.
The watchdog has also decided to simplify price caps applying to smaller business customers by moving from the existing model of price caps varying on a regional basis, to an England-wide national price cap.
This will ensure price caps are more reflective of the costs to serve smaller business customers, which Ofwat has concluded do not vary regionally.
The new price cap will be introduced from April 2023.
Ofwat will transition the introduction of the new price caps over a two-year period, including limiting annual changes in customers’ retail charges to no more £60 per year before inflation.
Georgina Mills, Business Retail Market Director at Ofwat said: “Our price caps ensure the business retail market is fair for small businesses that don’t shop around as much as much as larger businesses do. We need to make sure that these caps are at the right level, so that efficient water retailers can cover the costs of supplying their customers and small businesses don’t pay more than they should.
“We have listened to feedback over the consultation period and carefully considered all views. We know that these are challenging economic times but the actions we’re taking today will support stability in the market, while continuing to protect smaller business customers.”
Ofwat plans to review these price caps again in three to five years’ time.
Martin McTague, National Chair of the Federation of Small Businesses (FSB) feared the decision to hike water bills could eat into the margins of companies.
He said “Increasing the water price caps will add extra burden to small firms, who are also up against soaring energy costs, fresh interest rates hikes and consumers cutting back. These small firms have typically low margins and are least able to deal with the rising costs.
“While we welcome Ofwat’s decision to retain protections for the smallest firms, as well as a transitional element of the move, this is yet another yet another setback in the cost of doing business crisis.”