Scottish Water reports accelerated investment to boost resilience

(by Verity Mitchell)

Scottish Water’s Annual Report for 2025-2026 recorded progress on project milestones and the company's highest-ever investment of £1.3bn. £821m was in the regulated business, up from £778m.

Group revenue increased to £2,360m, up 13%. The regulated water segment saw increased revenues to £1,737.8m. The group operating surplus increased by 57% to £363m, driven by the regulated business which contributed £343.9m, up from £213.8m in the prior year. The group surplus for the year increased by 169% to £131m on a restated basis.

In regulatory accounting terms, regulated revenues were £66m lower than anticipated in Scottish Water's final determination (FD) and cumulatively £386m lower than the FD. Its surplus after Long Term Normative Charge (LTNC) items was £616m, broadly in line with the assumed financial model at £607m.

However, management had to pause several projects to remain within spending limits. This will delay performance benefits to customers, and has challenged the company’s supply partners. The book value of group net debt was £4,820.8m.

Two serious pollution incidents occurred compared to four in the previous years, but there were 191Category 1 and 2 incidents, down from 199 last year.

1,100 smart meters were installed in a trial to reduce water consumption. Early insights from the programme suggested that almost 20% of water supplied to these homes may be lost to leaks between the property boundary and the home. Scotland appears to use more water per person than all but one European country, and about 40% more than customers in Yorkshire. The company’s water conservation campaign delivered a 60m litre per day reduction in demand during summer 2025, but management recognised that a more sustained reduction will be needed in the future to increase resilience.

Leakage remains a significant area of challenge at 453 Ml/d, short of the company’s target of 450 Ml/d. Interruptions to supply of more than six hours increased to 5,169 from 5,047.

Management also highlighted the challenge of continuing to deliver a 99.92% water quality score with changing raw water quality and availability, and ageing infrastructure. Lead continued to be a continuing significant challenge for older properties.

Scottish Water’s final business plan for 2027-2033, part of the regulatory review process SR27, includes a £13.4bn investment plan with capex of £8.1bn.

Charges have increased for the average household for 2026-2027 by 8.67%, up £42 a year.