Scottish Water reports on a positive year but notes future challenges

Scottish Water has released its 2024-2025 report. Total revenues increased by 7.8% to £2,087m. Operating profit increased more, by 20.1% to £233m, driven by lower regulated energy and weather-related costs and a rates refund. Regulated margins were 13.6%, slightly higher than the 12.3% in the prior year. Falling finance costs increased the surplus before tax by 54.4% to £85m. Net debt increased 6% to £4,604m. Capex grew by 11% to £782m.

Its regulated income was £36m, 6% less than regulatory assumptions for the period 2021-2027, but the variance from 2021-2025 was a positive £25m. In order to realign with regulatory assumptions for the current year, management assumed that regulated repair and refurbishment costs are 19.5% lower and finance charges are 18% lower relative to the final determination, to compensate for an assumed 3.6% shortfall in regulated revenues and higher operating costs.

Scottish Water benefits from public ownership, enjoying strong customer loyalty in contrast to its peers in England and Wales. Customer satisfaction based on its customer experience survey was at 94%. A YouGov survey indicated that customer dissatisfaction was related to taste and smell of tap water, the increase in charges and the use of combined sewer overflows.

Bills increased by 9.9% in April 2025. 52% of Scottish households receive assistance with their bills. Bills are calculated on council tax bands rather than metered consumption, and range from £400.26 a year (band A) to £1,200.78 (Band H) for 2025/26. This compares with the average bill for England and Wales of £603, up 26% year on year. Customers with council tax bands of E-H will pay more than the average household in England and Wales.

Domestic per capita consumption of water in Scotland is recorded as 42% higher than that for customers of Severn Trent and 41% higher than Yorkshire Water’s customers, at 178 litres of water a day. The average for England and Wales is 137 litres. Scottish Water’s supply deficit will increase to 240Ml/d by 2050, as assumed in its adaptation plan.

According to chief executive Alex Plant, overall operating performance has strengthened year on year. There was a 22% reduction in interruptions to supply but further progress is not expected until after 2027 when Scottish Water’s mains replacement programme commences. Leakage reduced to 454Ml/d after an increase in the prior year, and 30% more leaks were repaired. Scottish Water decreased its category 1 and 2 pollution incidents to four from 11 in the prior year, but category 3 incidents rose by 14 to 199. 24,398 sewage spills were recorded in 2024 and there have been 250 sewage licence breaches over the last three years. Eighteen wastewater treatment works were non-compliant. This was a reduction from 22 in the prior year.

Wastewater from 37% of customers, and 75% of all sludge bioresources, are managed through Private Finance Initiative contracts which are now approaching the end of their concession periods. These higher-risk assets will be transferred to Scottish Water.

Management said that ageing assets and extreme weather are key challenges for the future. Repairs are up 14% year on year. A new monitoring system is being established for capital investment to ensure that projects are delivered on time and within budget.

In May, Scottish Water announced a new strategic plan. It said it needs to: collaborate and partner more with customers, communities and others; drive efficiencies; reduce demand on its services and assets; help its customers to use less water; and manage its surface water better.