Water companies are facing a major investigation after checks revealed that some firms may be releasing unpermitted sewage into rivers and watercourses.

The probe, by the Environment Agency (EA) and the water regulator, Ofwat, will involve more than 2,000 sewage treatment works, and any company caught breaching its permits could be handed fines or prosecuted.

The investigation was launched after the two bodies said several water companies admitted many of their sewage treatment works may not be compliant.

The number and names of companies that may not have been compliant have not been revealed.

The EA and Ofwat have recently been encouraging companies to improve their day-to-day performance and meet progressively higher standards to protect the environment.

As part of this action, the EA has been checking that water companies comply with requirements and has asked them to fit new monitors at sewage treatment works.

This is to make sure the right levels of wastewater are being treated before overflows are allowed to enter the environment.

The EA and Ofwat are now investigating all water and sewerage companies to assess the scale of the problem.

Dr Richard Benwell, chief executive of the coalition of conservation groups Wildlife and Countryside Link, said the crackdown was welcome.

Dr Benwell said: “For too long, poor monitoring of sewage overflow permits has been a ‘get out of jail free’ card for some water companies to pollute with impunity. Under-reporting, inaction, and failure to comply with statutory duties to reduce harm to our rivers and wildlife are unacceptable, and incompatible with stopping nature’s decline by 2030.

“We need Government to ensure our underfunded water watchdogs have a full armoury of financial and legal options available to ensure that corporate environmental crime does not go unpunished.”

Environment minister Rebecca Pow said the news was “shocking and wholly unacceptable”.

She added: “I have made my expectations of water companies and their legal duties crystal clear. Water companies must take urgent and immediate steps to abide by their legal duties. I will also be remaining in close contact with the regulators about any fines, prosecutions or other enforcement action that is deemed necessary.”

Last month, the Government was accused of rowing back on the issue after it initially refused to implement legal controls on the water companies.

Conservative MPs were whipped to vote down an amendment to the Environment Bill – now the Environment Act 2021 – that would have placed legal obligations on firms to prevent them from dumping raw sewage into rivers and seas.

The musician and environmental activist Feargal Sharkey criticised MPs who voted against the amendment, which was tabled by the House of Lords.

The Department for Environment, Food and Rural Affairs (Defra) later stated that the bill would be “further strengthened” on the issue, prompting Labour to accuse ministers of conducting a U-turn.

The bill was given the Royal Assent, turning it into law, last week.

Environmental Audit Committee Chairman Philip Dunne said he also welcomed the investigation and that it was “frankly long overdue”.

“Our waterways are the arteries of nature, far too many of which are being damaged by unacceptable sewage spills,” he said. “It is clear that with decades of under-investment in our sewerage network there are no quick fixes, but it is welcome that the Government, through the Environment Act passed into law last week, is already taking action to get a grip on this unacceptable activity.

“My committee has been examining, in depth, the current regulatory structures around permitted discharges. We will be reporting our conclusions on the adequacy of the existing system when we issue the report of our inquiry into Water Quality in Rivers.”