Recently, the share prices of United Utilities (LON: UU) and Severn Trent (LON: SVT) have faced challenges as investors shift their focus to the ongoing issues concerning Thames Water. Severn Trent saw a decline to 2,470p on Thursday, marking a 10% decrease from its peak in December.

Similarly, United Utilities retreated to 1,030p, reflecting an 8.40% drop from its highest point this year. Other utility companies in the UK have also experienced significant declines in their stock prices recently.

The escalating crisis at Thames Water has raised concerns among UK water utilities. The parent company of Thames Water, Kemble, risks entering insolvency imminently, potentially leading to the reacquisition of the company, which became privately owned three decades ago.

Investors in Thames Water, including major pension funds, are hesitant to inject additional capital into the company due to actions taken by Ofwat, the national water regulator. These investors are advocating for a 56% increase in water prices by 2030 and are seeking leniency in dividend regulations and mitigation of pollution breaches. Ofwat is set to release preliminary findings on these matters by June, with a final report by December.

The financial strain at Thames Water is worsened by its substantial debt amounting to £18.3 billion amid high-interest rates. The company also faces challenges in funding the maintenance of its water infrastructure, necessitating billions of pounds in investments.

The struggles faced by UK water utility companies like Severn Trent and United Utilities mirror those of Thames Water, albeit to a lesser extent. These companies encounter difficulties in raising water prices and have heightened maintenance needs due to aging infrastructure.

United Utilities and Severn Trent have both seen performance impacts attributed to external pressures. United Utilities' revenue for the six months to September 30th increased by 6.8% to £982 million, although profit plunged by 66% to £116 million due to rising operational costs. The company plans to allocate £13.7 billion for expenditures between 2025 and 2030.

On the other hand, Severn Trent reported revenue growth to £1.2 billion over six months, compared to £1.1 billion previously. Similar to United Utilities, its profits declined from £261 million to £255 million, with a notable 76.8% rise in capital investments.

Both companies are heavily indebted, with Severn Trent showing net debt exceeding £7.1 billion and United Utilities carrying over £8.5 billion in net debt.

Given the current challenges in the water sector, investing in United Utilities and Severn Trent may present difficulties without potential assistance from Ofwat through increased water prices.