Drought. Leaks. Sewage in the rivers. Rising bills. Angry customers.
The water industry is having a moment, and it has been building for a while.
Public trust in the sector is at rock bottom – the lowest levels since records began, according to the Consumer Council for Water – and only 44% of customers agree that the charges they pay are fair.
The UK’s water system needs around £100 billion of investment by 2030 and water companies have been given permission to raise consumers’ bills by an average of 36% to fund it.
Meanwhile, a scorching summer has left many of us living under ‘hosepipe bans’ while somewhere in the region of 3 billion litres of water leaks from our pipes every day – or 1 in every 5 litres supplied.
Whichever way you squint at it we are in a mess, and our new PM appears to have located the source of the problem in the question of ownership. Both Burnham and some of his supporters have made the case for “public control” of utilities to address inflation and help squeezed families.
Some companies seem close to the brink; Thames Water’s infamous and seemingly endless problems may well be resolved through some application of the UK’s Special Administration Regime (SAR) – but yesterday several outlets reported that the government had shelved those plans due to the prohibitive costs of around £2bn.
And this is the point – bringing the whole sector into public ownership would mean that some portion of the sector’s existing debt and the £100 billion investment need lands on the Treasury’s balance sheet. There, investment in our drinking water would have to vie with the NHS, roads, rail, and defence for scarce public funds.
In Scotland, where Scottish Water is publicly-owned, investment is at only 40% of the rate needed to keep pace. Scottish Water has taken on £4.5 billion in debt – backed by the UK taxpayer. Customer bills have risen above inflation.
The problem is this: our water challenge is not just about economic control; it is a structural crisis driven by climate change, aging legacy infrastructure, and rising demand.
When it comes to our energy supply, the government has taken some important steps to improve the UK’s ability to think and act strategically – but when it comes to water, we are still operating with, at best, a partial and stitched-together solution.
We need a national strategic framework equivalent to how we approach energy sovereignty – one that balances the need for private investment, public benefits, and resilience.
In the energy sector, the National Energy System Operator (NESO) provides independent, cross-sector planning to guide grid investment and transition strategy. The water sector requires a direct equivalent. The Environment Agency currently does some of that job, but without the levers to drive the outcomes we need.
Great British Energy now has a role unlocking on-the-ground investment in both large-scale and distributed or agile energy generation for a more resilient grid. No equivalent exists for water that could unlock wider small-scale investment in water resilience.
And instead of a potentially unaffordable push towards nationalisation, the UK should explore structural reform of water company mandates to ensure they have to balance public needs against shareholder value – to fall in line with the plan.
An option highlighted by the Institute of Directors (IoD) is transforming existing water operators into ‘Public Service Corporations’. Under this approach, company directors would be legally obligated to balance public interest, environmental stewardship, and customer outcomes alongside shareholder returns. Pay and dividends could be directly tied to long-term performance indicators, such as reducing leaks and increasing reservoir capacity.
The potential advantage is that the government could avoid a painful showdown with creditors when attempting to bring water companies under greater control, and companies could retain access to international private capital markets – avoiding the additional strain on the Exchequer to some degree.
But investment in our pipes and reservoirs is only one part of the story.
Expanding our supply needs to be combined with demand management, and a willingness from the public to put up with the disruption and inconvenience of taking a more strategic approach. The water stress that we are facing is about much more than annoying hosepipe bans – it risks impacting our food supply chains and driving up the cost of living even further. Witness the premature and failed harvests we are experiencing this year, and picture ten or twenty years hence.
We need an honest national conversation about water, and how we manage our water supply and demand. Water companies can choose to drive this national conversation where government is currently failing, or be at the mercy of it.
At the moment, they risk the latter.
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