Independent analysis by Public First, commissioned by Water UK, finds that England will only have enough water for 420,000 of the Government's target of 1.5 million homes it has pledged to deliver this Parliament.

 Water UK are also highlighting the fact that data centres are explicitly excluded from the Environment Agency's National Framework for Water Resources, meaning their additional demand for water is not currently accounted for in water resource planning.

The organisation which represents all of the water companies in the UK is calling on the Government to act on a package of reforms, most of which can be delivered immediately without new legislation.

The findings in Barriers to Growth show there is not enough spare water to accommodate the new housing and in some parts of the country there is only a 2% buffer between what is available and what is used.

England has been increasingly unable to supply new businesses and homes with the water they need for two reasons:

• Past governments have blocked applications to build new reservoirs, while planning rules continue to slow down new water infrastructure.
• New water resources, such as reservoirs, can only be designed on the basis that people and businesses use much less water than they actually do. Rules also prevent companies from building to meet future demand like the growing use of water by data centres.

Water UK’s recommendations include granting water schemes the same fast-track planning route used for Universal Studios, which cut its process from two years to six months, and instructing Natural England and the Environment Agency to use available scientific evidence rather than demanding unnecessary additional assessments based on hypothetical risks.

Household water use is falling more slowly than government targets assume. Water UK is also projecting business demand will rise as water-intensive industries such as data centres come online.

Water UK is warning that government targets force water companies to plan on the basis that business demand will fall by 9% by 2037-38. The trade body believes that assumptions about demand reduction should reflect real-world experience and not be unreasonably optimistic.

According to Water UK. one consequence of regulators’ use of very optimistic assumptions about the availability of future water is that less investment was approved, and so bills were reduced. Between 2010 and 2024, Ofwat cut water bills by around 20% in real terms.

“Keeping bills below inflation meant we missed the opportunity to finance an additional £100 billion of investment (when interest rates were at record lows”, Water UK says.

It warns that although households saved money in the short-term, this has left the country unable to keep up with the pressures of climate change, population growth and new businesses.

"Unrealistic optimism about how much water people will use in the future"

David Henderson, CEO of Water UK, commented:

"We desperately want to be able to provide enough water for new housing, but are being held back by a regulatory system that makes building new reservoirs much slower than it should be and unrealistic optimism about how much water people will use in the future. The fix is in the government's gift and most of it doesn't need new legislation."

Water UK's recommendations include:

• Extend permitted development rights so water companies can install standard equipment, such as the 3,500 water quality monitors required by 2030, without separate planning applications for each one.
• Grant water infrastructure Special Development Orders, as used for Universal Studios
• Issue stronger guidance to Natural England and the Environment Agency to use expert judgment and available scientific evidence rather than demanding what can be years of additional assessments to address hypothetical or highly speculative risks.
• Raise the threshold below which smaller developments are excluded from Environmental Impact Assessments.
• End the preference for biodiversity net gain to be delivered onsite.
• Uprate adverse cost liability caps in line with inflation and strengthen the evidence bar for judicial review, so a case is only heard if it is more likely than not to succeed.
• Treat water the same as energy on judicial review. The Chancellor has proposed protecting major energy projects from review on most grounds, and water is just as critical.
• The National Framework for Water Resources – an official document that sets out the national strategy for water infrastructure - should be corrected to reflect actual use of water and the risk of additional demand from businesses like data centres, which are currently explicitly excluded.
• The UK Government should do everything it can to remove the barriers that are making the construction of new reservoirs and other water resources unnecessarily slow and expensive.

Click here to download Barriers to project delivery - Water UK