England possesses adequate water resources for only 420,000 new homes, a fraction of the government's target of 1.5 million, according to an analysis by Water UK, the trade association for the water industry.
The group warns that a combination of insufficient available water and projected increases in demand, particularly from water-intensive data centers, jeopardizes the government's housing agenda. In some regions, the buffer between water supply and current usage is as low as 2 percent.
Water UK’s analysis indicates that household water consumption is decreasing at a slower pace than government projections assume. Concurrently, the association anticipates a rise in business water demand with the proliferation of data centers and other water-intensive industries. However, data centers are not currently accounted for in the Environment Agency's National Framework for water resources, meaning their significant water needs are overlooked in planning.
This situation is exacerbated by a regulatory system that hinders infrastructure development. David Henderson, chief executive of Water UK, stated that past governments have blocked applications for new reservoirs, and planning regulations continue to impede the construction of necessary water infrastructure. The last reservoir built in England was in Derbyshire in 1992.
New water resources, such as reservoirs, can only be planned based on assumptions of significantly lower water usage than is actually occurring. Current regulations also prevent water companies from building infrastructure to meet anticipated future demands, such as that from growing data center operations.
"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," Henderson said. He suggested that water schemes could benefit from a fast-track planning route similar to that granted to the Universal Studios theme park development, which bypassed standard local planning procedures.
Water UK also advocates for Natural England and the Environment Agency to base decisions on available scientific evidence rather than requiring additional assessments based on hypothetical risks.
The trade association noted that average water bills in England and Wales rose by 26 percent in April 2025, a necessary increase to fund vital new water infrastructure. This follows a period between 2010 and 2024 when the water regulator, Ofwat, reduced water bills by approximately 20 percent in real terms. Water UK estimates that if bills had kept pace with inflation during that period, they would have been 25 percent higher, allowing for an additional £100 billion in investment when interest rates were low.
According to Water UK, keeping bills low in the short term has left the country unprepared for the combined pressures of climate change, population growth, and the demands of new businesses and industries. The association warns that the efficiency, cost, and legal risks associated with the current planning system, along with environmental laws imposing unnecessary constraints, jeopardize essential infrastructure projects.