Can my business switch water supplier?

In England, yes. The business retail market opened in April 2017 and Ofwat puts around 1.2 million business customers in England in scope, with no minimum consumption threshold. In Wales it is far narrower: business customers can switch their water retailer only, not their sewerage retailer, and only where consumption reaches 50 megalitres a year, which rules out almost every small business. In Northern Ireland there is no retail market at all. NI Water is your supplier, its Scheme of Charges is approved by the Utility Regulator, and switching is not an option. That is why the allowances matter so much more here than the shopping around does.

What is the NI Water domestic allowance and how much is it worth?

It is a standing reduction for measured non-domestic customers where rates are payable on the property, and it has to be applied for rather than appearing automatically. Once granted, volumetric charges are not applied in each half-yearly billing period until consumption exceeds 100 cubic metres for water or 95 cubic metres for sewerage. Across a full year that is 200 cubic metres of water and 190 of sewerage charged at nothing. On the 2026/27 volumetric rates of £1.546 and £2.703 per cubic metre, the allowance is worth £822.77 a year to any measured customer who uses at least that much, whether they are a salon, a café or a small factory.

Why did my water bill go up when I never agreed to anything?

Water pricing is set by regulators every five years rather than negotiated with you. In England and Wales, Ofwat sets what the regional companies can recover, and business retailers buy wholesale at those charges before adding their own margin, so the bulk of your bill moves when Ofwat says it moves. Ofwat has now added a Cost Change Process allowing companies to seek extra funding between price reviews, and its first provisional decisions under it were published on 13 August 2026. In Northern Ireland, NI Water's charges are approved by the Utility Regulator and rose 7.9 per cent on average from 1 April 2026.

Is VAT on business water zero-rated or standard-rated?

It depends on what your business does, not on what you use the water for. Supplies of water are zero-rated under Schedule 8, Group 2, Item 2 of the VAT Act 1994. The exception is water supplied in connection with a relevant industrial activity, which HMRC defines as any activity in Divisions 1 to 5 of the 1980 Standard Industrial Classification, covering energy and water supply, mineral extraction and chemicals, metal goods and engineering, other manufacturing, and construction. Water to those customers is standard-rated. HMRC applies the test to the customer's predominant business activity across all its locations, so a manufacturer pays standard-rated VAT on the water in its offices too.

What is a non-return to sewer allowance?

Sewerage volume is not measured. NI Water assumes 95 per cent of the water you buy comes back down the sewer and charges you accordingly. If more than 5 per cent of your water genuinely does not return, through evaporation, steam losses, or water that leaves in the product itself, you can apply for a higher allowance against the volumetric charge. The two conditions matter. NI Water will usually require you to fit your own meter recording the water used in that activity, and any allowance granted runs from the date it receives a completed application form and is not backdated. Every month you wait is money you cannot recover later.

Water bills are going up again. It's the one utility nobody manages

Reacting to: Water bills set to rise for many after firms permitted extra funding (BBC News) →

Every business owner I meet has been through their energy contract. Most have done it two or three times since 2022, and some can tell you their unit rate to the penny. Almost nobody has ever looked at the water bill. It arrives, it is smaller than the electricity, it goes to the same nominal it has gone to for nine years, and that is the end of it.

That is a mistake, and this week is a good week to correct it. On 13 August Ofwat provisionally approved £3.4bn of additional spending for 13 water companies in England and Wales, which will be recovered from customers. But the more useful point is the one the coverage never makes: water is the utility where the money is in the allowances, not the price. Three of them are sitting unclaimed on a very large number of small business accounts right now, and the biggest is worth £822.77 a year to a Northern Ireland business that has never filled in a two-page form.

What Ofwat actually approved

The companies asked for £4.3bn. Ofwat provisionally allowed £3.4bn of it and rejected the rest. Roughly a third — £1.2bn — is to safeguard existing services and assets. £477m is for growth-related investment, driven by housebuilding and by new data centres, including provision for data centres in Manchester. £34m goes on PFAS, the "forever chemicals", including bringing forward Wessex Water's work from the 2030–35 window.

Five companies — Severn Trent, Southern, Thames, Wessex and South East — can add to charges within this price control period, on top of the rises already agreed in 2024. The BBC's household illustrations give a sense of the spread: Southern at £43 extra next year, South East at £1 more in 2029. The other eight — Anglian, Dŷr Cymru Welsh Water, Hafren Dyfrdwy, Northumbrian, South West, United Utilities, Yorkshire and SES — recover their additional spending after 2030.

This comes through a new Cost Change Process, which lets companies come back for money between five-yearly price reviews where a cost was not known when the last determination was set in December 2024. That is the structural change worth noticing. Water used to be a fixed five-year number you could put in a budget. It now has a mid-period appeal route in it.

Why this reaches a business bill, even though those figures are households'

The £43 and the £1 are household numbers, and I am not going to pretend otherwise. The mechanism that reaches you is the wholesale one. Your business retailer buys wholesale from the regional monopoly at Ofwat-set charges and adds a retail margin on top. The margin is the part competition acts on. The wholesale part is the bulk of the bill, and it moves when the regulator says it moves — whoever you buy from.

Which is the answer to the obvious question. Switching does not protect you from the increase. It protects you from paying an uncompetitive margin on top of the increase, which is a different and smaller prize, but a real one if you have never switched at all. The business retail market in England opened in April 2017, covering around 1.2 million business customers, with no minimum usage. Everyone who has done nothing since has been sitting on a deemed contract ever since — the default terms applied where no contract was ever agreed. Ofwat regulates those through the Retail Exit Code, and it is consulting on those protections right now. One quirk in your favour: deemed contracts carry no termination fees, so leaving one costs nothing.

Wales is much narrower. Business customers there can switch the water retailer only, not sewerage, and only above 50 megalitres a year — a threshold no ordinary small business gets near.

Northern Ireland: no market, no switch, and a 7.9% rise already banked

Here it is different in a way that is easy to miss if you read the national coverage. There is no retail market. NI Water is your supplier and its Scheme of Charges is approved by the Utility Regulator. There is nobody to switch to.

And the increase here is not provisional — it happened on 1 April 2026. Non-domestic charges rose 7.9% on average: measured bills up 7.2%, unmeasured up 8.8%, trade effluent up 9.8%. NI Water's own worked illustrations: a small shop or office using 285m³ goes up £38 to £569; a farm using 400m³ with a septic tank up £25 to £405; a medium factory on 1,306m³ up £351 to £5,232. There is also the point nobody says out loud: domestic water charges remain deferred, so in Northern Ireland businesses pay for water while the houses either side of them do not.

So if you cannot shop, the only lever is what you are charged for. That is where the allowances come in, and they are substantial.

Worked example: a salon in Ballymena on 500 cubic metres

An illustrative salon — not a client, round figures so the arithmetic is easy to follow. A 20mm meter, 500m³ of water a year. NI Water charges sewerage on the assumption that 95% of your water returns to the sewer, so 475m³ of sewerage. The 2026/27 rates are £1.546 per m³ for water and £2.703 per m³ for sewerage, with standing charges of £96 and £123.

Billed with no allowance: water £773.00, sewerage £1,283.92, standing charges £219. Total £2,275.92.
Billed with the domestic allowance: water charged on 300m³ (£463.80), sewerage on 285m³ (£770.35), standing charges £219. Total £1,453.15.
Difference: £822.77 a year. Every year. For a form.

The domestic allowance is available to measured non-domestic customers where rates are payable on the property, and it must be applied for — it does not arrive on its own. Once granted, volumetric charges are not applied in each half-yearly billing period until consumption passes 100m³ for water or 95m³ for sewerage. Over a year that is 200m³ of water and 190m³ of sewerage charged at nothing, which is the £822.77 above for anyone using at least that much.

Then there is the second one. That 95% assumption is a default, not a measurement. If more of your water genuinely never reaches the sewer — evaporation, steam losses, water that leaves in the product — you can apply for a higher non-return to sewer allowance. Think of a car wash, a brewery, a garden centre, a laundry with a steam press, a food producer whose water leaves in the jar. NI Water will normally want a sub-meter on the activity, and here is the sentence that should get you moving: an allowance runs from the date NI Water receives a completed application form, and is not backdated. Sit on it for six months and those six months are gone.

The VAT line that a lot of water bills get wrong

Third allowance, and this one is ours rather than the water company's. Supplies of water are zero-rated under Schedule 8, Group 2, Item 2 of the VAT Act 1994. The exception is water supplied in connection with a "relevant industrial activity", which HMRC defines as any activity in Divisions 1 to 5 of the 1980 Standard Industrial Classification: energy and water supply; mineral extraction, metals and chemicals; metal goods, engineering and vehicles; other manufacturing; and construction. Water to those customers carries VAT at the standard rate.

Two things go wrong with this. First, HMRC applies the test to your predominant business activity across all your locations, not to where the water is used — so a manufacturer's head office water is standard-rated too, and a builder's merchant needs to know which side of the line it sits. Second, businesses change what they do without ever revisiting the declaration they signed years ago. On the sewerage side, foul water reception, disposal and treatment is zero-rated for everyone, but unblocking and maintaining drains is standard-rated for everyone, and emptying a septic tank flips with the same industrial test. If you are not VAT registered, or partially exempt, a wrong classification is a permanent cost rather than a timing difference.

Four things to do this week

Get the last four water bills out and read them. Not the total — the lines. Meter size, volumetric rate, standing charge, whether an allowance is shown, and what VAT rate is being applied. Fifteen minutes. This is the whole job.
Northern Ireland: apply for the domestic allowance today if it is not on the bill. Measured customer, rates payable on the property, and it is worth up to £822.77 a year on the arithmetic above. Start at nibusinessinfo's water charges guidance. If more than 5% of your water never reaches the sewer, apply for the non-return allowance in the same phone call — it does not backdate.
England: find out who your retailer is and whether you ever chose them. If the answer is "the one we were given in 2017", you are on a deemed contract with no exit fee. Ofwat's eligibility guidance sets out who can switch.
Split water out of "utilities" in your nominal ledger. One combined line is why nobody has looked at this in nine years. Water, energy and telecoms as three separate codes, reviewed in the management accounts, and the next increase shows up as a variance instead of a surprise. Our bookkeeping work is where that gets set up properly.

What is still uncertain, and when you will know

The £3.4bn is a draft determination, not a final one. Consultation responses are due by 5pm on 24 September 2026, and Ofwat expects to publish final determinations in December 2026. The figure can move down as well as up — £900m of what the companies asked for has already been refused. December is when it becomes a number you can budget against.

How much reaches non-household bills, and in which year. Ofwat's published illustrations are household ones. The wholesale pass-through is the mechanism, but the per-business effect depends on your region, your meter and your retailer's margin, and it will not be visible until the final determinations translate into 2027/28 wholesale tariffs.

Northern Ireland's 2027/28 charges. NI Water's Director of Finance put this year's rise down to cost pressures and said it was necessary "to utilise the full price limit allowance" — which is regulator-speak for taking everything permitted. Next year's Scheme of Charges lands with the April billing cycle. Plan on the same shape.

Where we come into this

None of this is dramatic and there is no deadline being waved at you. It is a bill that has quietly risen 7.9% here and is set to rise again in England and Wales, sitting in a nominal code nobody opens, with three separate allowances against it that most owners have never been told exist. On the salon above, the domestic allowance alone is £822.77 — more than most small businesses save from a year of energy switching, for one form and no contract.

Reviewing the cost base line by line is what our advisory services work is for, and it is exactly the kind of thing that surfaces in a cashflow and profit improvement review rather than in a set of year-end accounts. The VAT classification sits with tax planning. And if you are in Northern Ireland, our Ballymena office deals with NI Water's charging structure routinely — which a firm based in Great Britain has no reason to know about at all, because for their clients there is a market to switch in.

Water bills are going up again. It's the one utility nobody manages — and there's £822.77 sitting in a form.