Last reviewed 4 August 2020

It is predicted that parts of the country are likely to run out of water within the next 20 years unless urgent action is taken to improve water infrastructure, reduce demand and fix the leaks. In this article, John Barwise reviews a damming report on the collective failure of the Government, the water companies and the regulators to manage England’s precious water resources, and highlights what needs to be done to avoid future shortages.

Demand for water is currently about 14 billion litres per day in England and Wales. Due to rising demand and a falling supply of water, the Environment Agency (EA) says we could run out of water in 20 years and estimates that England will need an extra 3.6 billion litres per day by 2050 to avoid further shortages.

Water shortages — a well-known problem

Predictions of future water shortages in the UK have been known for years but concerns over climate change has increased the sense of urgency. In its 2017 climate change risk assessment, the Committee on Climate Change highlighted shortages in water supply as one of five priority climate change risks that needed stronger policies and urgent action. 

The following year, the then Environment Secretary, Michael Gove, lambasted water company chiefs for failing to invest in essential infrastructure, pointing out that while 95% of the profit of the main water utilities went to shareholders there had been no investment in new nationally significant supply infrastructure since privatisation.

Earlier this year Environment Agency boss, Sir James Bevan, warned of a “jaws of death” scenario where much of the country could simply run out of water in 20 years time without new reservoirs, reduced consumption and less leakage.

Documents released by the National Audit Office, forecast water supply to decrease by 7% by 2045 and highlights Defra’s failure to provide guidance for water companies of the different types of intervention needed to improve resilience.

The latest report, Water Supply and Demand Management, published by the Parliamentary Public Accounts Committee (PAC) in July, exposes the systemic failures of all those responsible for water management in England and identifies the key problems that must be addressed to avoid future water shortage.

The report describes the Government’s efforts to encourage reductions in water consumption as “weak” and says it has been “too slow” to implement policies that could improve water efficiency. Defra, Ofwat and the Environment Agency are also criticised in the report for collectively taking their “eye off the ball” on the consequences of looming water shortages in the coming years.

On water companies’ actions, PAC said there had been “no progress” on reducing leakage and said it remained “sceptical” about the effectiveness of water companies to mitigate environmental damage.

Who is responsible for what?

Overall responsibility for policy and setting the regulatory framework for water in England, sits with the Department for Environment, Food & Rural Affairs (Defra), which oversees a complex system of multiple regulators and privately-owned water companies.

Water companies provide drinking water and wastewater treatment services through supply networks to residential, commercial, and industrial sectors of the economy.

The water regulator, Ofwat, regulates the services provided by water companies and sets performance targets during its five-yearly price control process.

The Environment Agency’s role is to manage the water resource management process, with powers to ensure water companies and other water abstractors abide by the terms of their environmental permits and licenses. These powers cover how much water they can take out of the environment and how they should handle and treat sewage.

Report main findings

The PAC report identifies several key areas where water resource management must be improved to avoid future shortages.

  • Lack of government guidance — the Government has failed to be clear on how water companies should balance investment in infrastructure with reducing customer bills. Ofwat scrutinises companies’ investment proposals and accepts or rejects them based on the evidence of need, and whether the costs of the proposal are reasonable. According to the PAC report, Defra should provide more guidance to water companies on the level of investment needed to ensure resilience by 2050 and how they should balance this in their business plans with pressure to reduce consumer bills.

  • Leaks — over 3 billion litres of water are wasted every day through leakage. The report blames water companies for their “complacency and inactions” as the primary cause. Leakages were reduced from over 4.5 billion litres to around 3 billion litres in the 1990s but there has been no improvement in the last 20 years — despite Defra’s insistence that leakages must be a priority. The committee is calling on the Government to publish annual leakage performance targets in an effort to “name and shame” those companies that are failing to address the problem.

  • Water consumption — failing to get the message across. The report exposes the lack of a “coherent or coordinated national message” on how to save water. Average personal consumption in the UK is 143 litres per day, significantly higher than the average of 128 litres for EU member countries. Defra made a commitment to set a target for personal water consumption in 2018 but has failed to do so. Water companies have also failed to get the message across. Defra has been asked to report back to the PAC committee by December with a plan on how it intends to increase public awareness of how to reduce water consumption.

  • Water inefficiency — Defra has ignored calls from water companies to introduce product labelling and other measures to improve water efficiency. The PAC report calls on the Government to ensure that all new homes are built to a standard water usage of 125 litres of water per person per day, in line with 2015 building regulations. The committee has asked Defra to report back within four months on plans to implement product labelling and other changes, including building regulations, designed to improve water efficiency.

  • Water abstraction and pollution — avoiding environmental damage. The EA regulates abstraction licences and has the difficult task of balancing its statutory duty to protect the water environment whilst ensuring that demand for water can still be met. The problem is particularly acute during hot dry spells when demand increases as water levels fall. Pollution concentrations can also increase with agricultural run-off or when water companies breach permit conditions. Major infrastructure projects such as HS2 which significantly increases water demand, which the committee says is a major concern, and is calling on the EA to set out mitigation plans for eliminating environmental damage.

  • Net zero — not sufficiently embedded in the water industry. The process of building new water infrastructure is energy-intensive with differing impacts on carbon emissions. Water companies and the Environment Agency have committed to net zero by 2030, but according to the committee report, neither the regulator nor the regulated have clarified how this will be achieved or how carbon footprints are taken into account in the planning process, or in Ofwat’s methods for assessing infrastructure options. As part of the on-going water inquiry, the committee has asked Ofwat to explain how it will ensure water companies take full account of carbon emissions in appraising the options available to them.


The Public Accounts Committee’s (PAC) report says the Government has failed to be clear with water companies, privatised in 1989, on how they should balance investment in infrastructure with reducing customer bills, and says “ponderous” water companies have made “no progress” in reducing leakage over the last 20 years. 

Commenting on the report, Meg Hillier MP, Chair of the Committee, said: “It is very hard to imagine, in this country, turning the tap and not having enough clean, drinkable water come out — but that is exactly what we now face. Continued inaction by the water industry means we continue to lose one fifth of our daily supply to leaks.”

The report is particularly critical of Defra’s “lack of leadership in getting to grips with all of the issues threatening our water supply”, describing its failings as “shocking” and “wholly unacceptable.”

“Empty words on climate commitments and unfunded public information campaigns will get us where we’ve got [to in] the last 20 years: nowhere. Defra has failed to lead and water companies have failed to act: we look now to the Department to step up, make up for lost time and see we get action before it’s too late,”  Hillier added.

Defra has now been asked to produce annual performance league tables for water companies and to “step up on promoting water efficiency” and deliver an effective campaign to raise awareness of the need to water saving.

Croner-i has published its own Water Management Toolkit to help businesses improve water management, optimise consumption and reduce costs. The toolkit can be accessed here.