The government can set ambitious housing targets, roll out renewables and make moves into the data economy, but little of this can come to fruition if the water system cannot supply, move and treat water to the extent that new development requires. James Cattermole, Partner, Carter Jonas, investigates.
As part of the national housing debate, an important but often overlooked question is how the country funds and delivers the enabling water infrastructure fast enough.
The increasing significance of water
Previously water was rarely perceived as a development risk. But recent figures from the Environment Agency demonstrate the extent to which that is changing: England faces a 5-billion-litre-a-day shortfall for public water supplies by 2055 without urgent action, plus a further 1—billion-litres-a-day deficit for the wider economy.
This deficit is already impacting planning, limiting locations for growth and forcing hard questions from investors about deliverability.
It is easy to understand why this matters to the development economy, by looking at the way the water neutrality issues in parts of Sussex effectively paused many schemes that could not demonstrate no net increase in demand.
The restrictions were lifted in late 2025 after a policy and delivery package was agreed, but similar issues exist throughout the country, and a piecemeal solution is far from an efficient one.
The importance of the reservoirs programme
The government’s commitment to fast-tracking nine new reservoirs by 2050 is very welcome. In its 2025 report, Ofwat describes the reservoir programme as having the potential to supply 670 million litres a day.
The most important shift for us, in managing the consents process on behalf of water industry clients, is the decision to use the nationally significant infrastructure route for the new facilities. In May last year, the Government announced NSIP status for future reservoirs in East Anglia and Lincolnshire, moving consenting into the Planning Act 2008 framework and the Development Consent Order (DCO) process.
In principle, the NSIP regime is beneficial because it creates a single, structured consenting process with a defined examination phase. The increased certainty on timescales is a significant benefit. While it does not remove scrutiny or controversy and requires more work upfront, it removes the potential for indefinite extensions to planning decisions.
DPC and renewed prospects for funding
Consenting is only half the problem: the other half, which must be clearly set out in the business plan, is the procurement and financing of a pipeline at scale when public sector cost pressures are tightening.
This is where Direct Procurement for Customers (DPC) is beneficial. Ofwat expanded the use of DPC to bring competition into the delivery of large schemes by appointing a competitively appointed provider to design, build, finance and in some cases operate and maintain an asset over a long-term contract.
A DPC can turn a reservoir or transfer scheme into something closer to an infrastructure concession, with defined scope, defined performance requirements and a reliable revenue stream. This appeals to institutional investors and so can reduce pressure on balance sheets.
The South East Strategic Reservoir Option near Abingdon is an example of how the use of DPC, can provide necessary speed. South Lincolnshire’s proposed reservoir has also been assessed for DPC suitability, reflecting the model’s relevance to very large storage schemes.
For this approach to work, procurement must be adapted. DPC does not remove environmental mitigation, land rights complexity or programme risk; it forces the sector to allocate those risks explicitly and price them early.
Water and power are now inseparable
Another challenge is that water supply is increasingly energy-dependent in a high-cost, decarbonising system. Treatment, pumping, transfers, recycling and desalination require considerable energy resources.
While water is key to supporting energy infrastructure, it is important that decisionmakers recognise the importance for the energy sector itself to be energy efficient.
The sector is already responding. Severn Trent has committed to achieving 100% of its electricity from renewable sources by 2030. We are actively involved in identifying existing assets or land opportunities that could host generation and provide direct power from local sources over the long term across the sector.
This is important for financing because it removes, or at least reduces, uncertainty due to demand; it also impacts on operating costs and the credibility of Net Zero claims.
The Independent Water Commission
Last summer’s Independent Water Commission report emphasised that fragmented governance leads to slow delivery, unclear priorities and rising risk.
The Commission’s final report set out recommendations including stronger and more integrated regulation, a clearer long-term vision, more integrated planning across the water system and improved resilience supported by better data and asset understanding.
Since then, it has been encouraging to see the publication earlier this year of the government white paper, A New Vision for Water which sets out intended reforms and a move towards a more joined-up regulatory architecture, stressing that confidence depends on stable rules, coherent priorities and consistency. . There is no question that stronger central governance is necessary to drive cross-regional solutions.
Is enough being done?
Change is more positive now than for many years: the reservoir pipeline, the use of DPC for faster delivery and Ofwat’s PR24 determinations which back £104 billion of sector spending over 2025 to 2030. But delivery will not be judged on announcements: it will be judged on whether the sector can turn a pipeline into assets while keeping bills, carbon and programme risk under control.
Advice for investors and delivery teams
Looking ahead, I suggest a focus on five priorities. First, ‘water readiness’ must be a board-level test; second, prioritise projects that reduce system risk, not just those that add capacity.
Leakage, metering, reuse and demand management do not have the attraction of an open reservoir, but they often have faster delivery cycles and more predictable outcomes, and they buy time. Third, treat DPC as an ‘investability’ discipline. DPC has moved on from being a novelty.
It adds scope, risk allocation, performance standards and governance, all of which contribute to clarity and reduce uncertainty.
NSIP strategies must align land and stakeholder strategy early, as projects live or die on land assembly, rights and credibility with affected communities. And finally, the focus must be on building portfolios, not one-off investments. The winners will be those who can repeat delivery, standardise where possible and treat programme management as a core capability, not a consultancy add-on.
Water infrastructure is now national economic infrastructure. If the sector can offer investable routes to delivery and governance that holds for decades, capital will follow. If it cannot, the constraint will keep migrating from one region and one growth sector to the next.
