Water debt across England and Wales has exceeded £2bn. Over 8% of customers are in arrears with an average debt of £822 per household.
It’s no wonder we’re seeing more water companies struggling to manage debt and finding collection increasingly difficult. Rising household bills, mounting public pressure, tighter regulation and proposed market changes are exacerbating the issue.
Over the next two articles, we’ll set out the common challenges and share some of our experts’ techniques (with real-life results) to reduce your debt levels.
The scale of the challenge
Despite nearly half of households experiencing bill payment difficulties over the past year, two-thirds remain unaware of available financial support. In our Water Poverty report, we highlighted that only 11% of customers get any help, even though 20% report struggling to pay.
There is a disconnect between need and support. Traditional affordability tools like bill caps aren’t working. Many customers who are most in need of support, particularly those with fluctuating incomes, unregistered vulnerability or existing debts, are falling through the gap. Insufficient data and a lack of insight to identify pre-debt behaviours means many companies are missing crucial opportunities for early engagement and debt avoidance.
It hardly bears repeating, but customer dissatisfaction is at a critical level. The UK Customer Satisfaction Index (UKCSI) reports water customer satisfaction has dropped to an eight-year low, sitting 5% below the long-term average. Making it harder to build trust, provide support, and recover outstanding debts.
Positive opportunities and taking the first step
At BFY Group, we work with a wide range of organisations across water, energy, and utilities, driving lasting change for our clients. Over the last 20 years, we’ve helped clients survive (and flourish through) a similar crisis in the energy sector.
The water industry can learn valuable lessons from energy's 10–20-year head start in debt management and customer engagement. With the added advantage of being able to leverage modern technology like AI, automation, and omni channel approaches that weren't available to early energy pioneers.
Longer-term, water companies must go beyond basic affordability measures and adopt a more proactive, empathetic, and data-driven approach to customer support. Allowing them to identify, target and protect vulnerability before it turns into hardship. But there are plenty of tried and tested techniques to make a difference to your bottom-line, in a matter of weeks.
Ways to stay ahead
The pressures facing the water sector won't ease independently. With PR24 defining the investment scale and performance expectations for AMP8, and wider reform approaching, water companies can expect far closer regulatory and public scrutiny of debt performance. The current commercial pressures are already exposing weaknesses in systems and recovery strategies.
Instead of waiting for external factors to improve, build your own resilience now. Understand your own debt, check your data, intervene earlier and use existing tools more effectively to strengthen your processes. For example:
- Gain debt book visibility. Go beyond generic approaches and use advanced segmentation to understand which customers represent the highest risk and greatest opportunities. We helped one water client increase cash collections by £5m in 5 months with better segmentation, automation and targeted direct debit outreach.
- Deploy digital campaigns. Targeted email and SMS campaigns can re-engage customers before debt escalates. With our support, one of our clients recovered >£8.5m cash and reduced Bad Debt Charge (BDC) by £4.5m.
- Fix data gaps. Check for inconsistencies or duplicated data. One of our clients had two different data systems with data inconsistencies. By consolidating and comparing the data, we discovered £15m of fictitious debt.
- Benchmark and monitor performance. Understanding how your collection rates, payment plan uptake, and provisioning compare to industry standards reveals immediate improvement opportunities.
- Assess your debt-recovery process. Our debt maturity assessment looks at ~190 activities across 10 key capabilities. We highlight strengths and provide targeted recommendations for immediate improvement. We created a 6-month programme for one client to deliver ~£50m in debt collections across 5 work streams.
With real-world experience and a collaborative, hands-on approach, we help water companies regain control of rising debt. Clients get rapid, measurable results from our tailored, insight-led refinements. By identifying what’s not working and applying best-practice thinking, we drive sustainable improvements to profit and loss.
In our next article, we’ll share some more of our proven longer-term methods, and the exceptional results our clients achieve. And we’ll dive deeper into how to assess and refine your own debt recovery processes.
If you'd like to discuss how we can help address your debt challenges, contact Rachel Littlewood.
