Cleaning up its act, UK water looks to the future

Setting the scene: a system in need of reform

Ok, so some scene setting needs to take place. Setting out the reasons for reform, the UK government set out six indicators:

• There are currently four regulators in the UK
• There are more than 20 plans and processes for water companies to follow and publish
• It is estimated that the water sector will spend £250m to produce business plans for PR24 (the regulatory review of the sector)
• It has been 25 years since the last uplift in compensation rates for customers failed by water companies
• Pollution events in 2024 increased by 60 per cent compared to 2023
• Approximately 60 per cent of all water mains were built before 1981, and 13 per cent are over 100 years old
• Current estimates suggest that by 2055, under current practices, there will be a five billion litre shortfall in public water supply, with a further one billion shortfall in the wider economy.

These are some of the main reasons that set out the need for reform of the water sector in England and Wales.

In addition, a report from the Climate Change Committee – A Well-Adapted UK – has identified drought as a major climate concern facing the UK. It predicts that by 2055, the UK could see an annual shortfall of 320 million litres for private water supply for agriculture, industry and power. If climate change leads to hotter, drier summers, this could rise further to 657 million litres. Water scarcity, the report states, is already causing economic losses of £3.8bn (€4.43bn), which if left unchecked could rise to £6.9bn (€8bn) by the 2050s

Water efficiency measures are key to a resilient future. This will require cross-sector collaboration, innovation and greater public engagement. In the UK alone, the Committee states that resilience measures will require £11bn (€12.bn) per year in investment.

Water reform bill: a new vision for regulation

In the first few months of 2026 – preceding the King’s speech to parliament – the UK government released a White Paper, A New Vision for Water, outlining its vision for the future of water. 

Foundations for this ‘new vision’ were laid in 2024 by commissioning an independent review of the water sector led by Sir John Cunliffe. The commission’s final report set out the areas that needed ‘major and ambitious change’, including the need to reform regulation, governance, management and legislation.

Among the 88 recommendations included in the final report, the headline finding was the need to abolish industry regulator Ofwat and, in its place, create a new single water industry regulator for England. In Wales, the report recommended that regulation of water should be devolved and integrated into the Welsh environmental regulatory body.

At the same time, the (then) Environment Secretary, Steve Reed, made a statement in parliament confirming plans to create a new single regulator for the water sector in England, as well as wider regulatory reforms.

Following a series of amendments, the Water (Special Measures) Act 2025 gained Royal Assent at the beginning of 2025. Its aim was to:

• Strengthen regulation of the water industry
• Enable the water industry’s economic regulator, Ofwat, to ban the payment of bonuses to water company executives if environmental standards are not met
• Increase accountability for water company executives.

What does the White Paper propose?

According to a briefing document, the paper sets out the long-term plans for water sector reform, including establishing a new regulator, attracting third-party investment, and delivering better outcomes for customers.

A new regulatory body will include a Chief Engineer to “bring back the hands-on checks of water infrastructure that Ofwat has failed to provide, ending the days of water firms marking their own homework”.

Other powers will include:

• An ‘MOT’ approach to checking that water company infrastructure is working as it should be, focusing on preventing problems before they become more serious
• Stronger inspection powers, enabling the regulator to conduct ‘no notice’ inspections of water companies
• The introduction of water-company-specific supervisory teams
• The introduction of a new Performance Improvement Regime to enable the regulator to act quickly and “fix failures”.

Plans in the paper include reforms to strategic policy documents and an improved joined-up regional planning function (to be co-developed with local groups in 2026). Resource planning will be streamlined, synthesising multiple plans and processes into two core frameworks (one focused on water supply, and a second on water environment). Existing performance commitments will be simplified to make water companies more attractive to investors.

Improvements will be shaped by the introduction of new mapping and statutory resilience standards which aim to increase understanding of existing water infrastructure and make it easier to determine when upgrades are needed. 

Resource planning will be streamlined, synthesising multiple plans and processes into two core frameworks 

Consumer understanding of water is also addressed in the paper through the rollout of smart metering and a water-efficiency labelling programme that will highlight how much water gets consumed by household appliances.

To facilitate the changes outlined by the White Paper, the UK and Welsh governments will publish a Transition Plan that will set out the path to reform – this will be followed by the introduction of the Water Reform Bill. For many in the industry, the transition phase is crucial to the success of the enterprise, with the need to align the sometimes overlapping, sometimes different agendas of the current fragmented regulation landscape. 

As an example, Michael Lancashire posted an article on his LinkedIn blog highlighting some of the many practical, real-world challenges. He raised the issue that Water UK found that “storm overflow reporting alone required companies to submit more than 30 returns each year to Ofwat, Defra, and the Environment Agency, often in slightly different formats”.

While this might be on the easier side to fix, it does highlight that across each of the current regulators' domains there will be numerous such examples that need to be harmonised, quantified and agreed. It is also worth noting that succeeding in streamlining and consolidating such a fragmentary landscape can only have benefits.

Increased water company investments

Average household water bills have recently risen by £33 (€38.51) a year, a 5.4 per cent increase. This will help to fund an investment programme worth £104bn (€121bn) that runs until 2030. In the next financial year, water companies are expected to invest £20bn (€23bn) to secure water supplies, end sewage spills and support the growth needed to future-proof the sector. 

It is also worth noting that water companies are making AMP8 spending commitments, with an eye on the next cycle, while waiting to find out exactly how the water reforms will affect them.

On the need for investment, David Henderson, Water UK chief executive, told media: “We understand increasing bills is never welcome, but the money is needed to fund vital upgrades to secure our water supplies, support economic growth and end sewage entering our rivers and seas.”

Water UK provided a summary of some of the infrastructure projects that will form part of the most recent investment programme. These include:

United Utilities will begin a £3bn (€3.5bn) upgrade in 2026 of the 110km Haweswater Aqueduct which carries 570 million litres of water every day to 2.5 million people in Cumbria, Lancashire and Greater Manchester – nearly 5 per cent of England’s population.

Anglian Water is investing £47m (€55bn) to construct 35 new storm tanks across the East of England. 

South West Water is investing £760m (€887m) over the next five years to reduce spills from storm overflows across the south west. 

Bournemouth Water will continue with a £113m (€132m) upgrade of Alderney Water Treatment Works north of Bournemouth. When completed, the treatment works will use advanced treatment technologies to supply water to 250,000 customers.

Essex and Suffolk Water will complete a nearly £50m (€58m)  investment at the Barsham water treatment works in Suffolk. This includes the building of a new underground reservoir that will hold 20 million litres of water to supply more than 75,000 customers.

Thames Water will continue a £20m (€23m) programme to replace water mains pipes in London. The work will increase capacity, while reducing leaks and bursts.  

Welsh Water completed a new nature-based solution at Pont-y-felin near Pontypool in 2025. The project is the first of its kind in the UK, using reed beds and wetlands to naturally treat discharges from a nearby storm overflow and protect the Afon Lwyd river.

South East Water will carry out vital planning and design work for a new reservoir that has been proposed for more than 80 years. When completed, it could supply up to 22 million litres a day.

Yorkshire Water will continue a £406m (€474m) programme to replace more than 1,000km of mains water pipes across the region to reduce bursts and leaks. More than 60 mains replacement projects began in 2025 and over 120km of new mains have been laid.

Severn Trent is spending £415m (€484m) to lay 870 miles of new water pipes across the Midlands. The investment will reduce leaks and improve water quality while creating 440 local jobs.  

Southern Water is investing £99m (€116m) to improve and protect water quality on the Isle of Wight. This involves improving treatment sites, pumping stations and the network, as well as working with partners to install sustainable drainage solutions. This will help protect the Island from flooding and storm overflow releases.  

Portsmouth Water will continue work on the Havant Thicket reservoir – the first new reservoir to be constructed in the UK in over 30 years. When finished, the reservoir will hold up to 8.7 billion litres of water.

Hafren Dyfrdwy is investing in new water pipes, including £800,000 (€943,000) in Powys alone. This forms part of its biggest-ever investment of £266m (€310m) by 2030.

Wessex Water is investing £34m (€40m) to expand the Saltford sewage treatment works, which serves the city of Bath and surrounding areas. 

Yet despite these investments and the spending commitments, public trust is at an all-time low.

AI adoption plans

It is fair to say that water tech is utilising artificial intelligence (AI) at an increasing rate. Water companies are also adopting AI at all levels of practice. Current UK water regulator Ofwat has set out guidance to support safe and responsible AI adoption and deployment across both water and wastewater services. This will cover the transition period set out in the government’s Water Reform Bill until a new regulator is appointed. 

Ofwat recognises that AI is already becoming embedded across utility operations, from leakage detection and network optimisation to customer service, billing and regulatory reporting. It states that the ‘focus is no longer whether AI should be used, but how it can be deployed in ways that improve outcomes for customers and the environment while maintaining trust and accountability'.

The regulator’s plan focuses on five priority areas: understanding sector-wide AI adoption, developing formal guidance, enabling innovation, building monitoring frameworks, and strengthening Ofwat’s own AI capability.

Building standards

As well as committing to investments in big infrastructure projects, the UK government is looking into ways of conserving water at the household level. In 2025, it began a consultation on amending the Water Efficiency Standards in the Building Regulations 2010. The purpose was to lower water usage in homes through appliance efficiencies, but also to unlock planning approvals for housebuilding. By reducing the amount of water each home uses, the restrictions of building homes in water-scarce areas can be eased, increasing the numbers being built.

While the consultation responses haven’t been published, the proposal falls short of the Dutch government’s plans to conserve drinking water through regulations that require greywater recycling in residential and office buildings.