Trade body says housing target, AI data centre expansion and wider economic growth all risk being constrained by outdated assumptions over future water demand
England’s water planning framework is failing to keep pace with the Government’s ambitions for housing, artificial intelligence and economic growth, according to Water UK, which is calling for urgent reforms to planning rules and national water resource modelling.
The trade body argues that current policies significantly underestimate future demand for water while making it unnecessarily difficult to develop the reservoirs and other strategic infrastructure needed to support new homes and businesses. It warns that the consequences threaten multiple pillars of the Government’s growth agenda.1
The warning about housing targets comes in a new report, Barriers to Project Delivery.2 This is supported by analysis from consultancy Public First,3 which concludes that England currently has sufficient water resources to support only around 420,000 of the Government’s target of 1.5 million new homes during this Parliament. According to Water UK, some parts of England now have a buffer of just 2% between available water supplies and existing demand.4
The trade group’s figures undermine not only the government’s housing plans, but also official planning assumptions around industrial water demand, particularly from data centres, with which the Government aims to make the UK a global leader in artificial intelligence.
In evidence submitted to Parliament, Water UK says data centres are explicitly excluded from the Environment Agency’s National Framework for Water Resources, meaning their future water requirements are not incorporated into long-term planning. Yet the Government aims to triple UK data centre capacity by 2030, with some individual facilities already requesting up to three million litres of water per day for cooling.5
The group says this disconnect stems from two principal shortcomings. On the one hand, successive governments have delayed or blocked the construction of major new reservoirs while planning and environmental consenting processes continue to slow delivery of strategic water infrastructure. At the same time, Water UK says that regulators require water companies to plan on the basis of overly optimistic assumptions that household water consumption will fall rapidly and that business demand will decline by 9% by 2037-38, despite evidence that new water-intensive industries are emerging.6
The trade group for the sector is therefore calling for a package of reforms, many of which it says could be implemented without primary legislation. These include giving nationally significant water infrastructure the same fast-track planning treatment used for the proposed Universal Studios development, allowing regulators to rely on existing scientific evidence rather than requiring further assessments based on hypothetical environmental risks, and updating national water planning assumptions to reflect expected demand from sectors including data centres.7
David Henderson, chief executive of Water UK, said: “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.”
The intervention comes amid growing concern over England’s long-term water resilience following another period of exceptionally dry weather. Ministers recently convened water companies to review drought preparedness after heatwaves drove daily demand sharply higher, while the Environment Agency has warned that prolonged dry conditions are placing increasing pressure on reservoirs and rivers.8
Environment Agency planning has estimated that, without further action, England’s public water supply could face a shortfall of more than 4.8 billion litres a day by 2050,8 with a newer national framework projecting a deficit of up to five billion litres a day by 2055. Addressing the gap will require new supply infrastructure alongside substantial reductions in leakage and consumption. Water UK’s evidence on data centres suggests these pressures could increasingly constrain the Government’s ambitions for housing, AI infrastructure and wider economic growth.
Notes
[1] “Water UK warns a lack of water risks blocking more than a million new homes”, published 20 July 2026. Link: https://www.water.org.uk/news-views-publications/news/water-uk-warns-lack-water-risks-blocking-more-million-new-homes
[2] Barriers to Project Delivery. Link: https://www.water.org.uk/sites/default/files/2026-07/Barriers%20to%20project%20delivery%20-%20FINAL.pdf
[3] “The Risk of Water Shortages”, May 2026. Link: https://www.water.org.uk/sites/default/files/2026-07/Public%20First%20Analysis_%20The%20Risk%20of%20Water%20Shortages.pdf
[4] “Water UK warns a lack of water risks blocking more than a million new homes”, Water UK.
[5] “Data Centres’ Water Use – Water UK’s response to the Environmental Audit Committee call for evidence 02.04.26”. Link: https://committees.parliament.uk/writtenevidence/164766/html/
[6] “Water UK warns a lack of water risks blocking more than a million new homes”, Water UK.
[7] ibid
[8] “Water Company Resilience to Heatwaves and Sustained Hot Weather”, Statement made on 16 July 2026. Link: https://questions-statements.parliament.uk/written-statements/detail/2026-07-16/hcws279
[9] “A summary of England’s revised draft regional and water resources management plans”, Updated 20 December 2024. Link: https://www.gov.uk/government/publications/a-review-of-englands-draft-regional-and-water-resources-management-plans/a-summary-of-englands-draft-regional-and-water-resources-management-plans
[10] “3. How much additional water we need: National Framework for Water Resources 2025”, Policy Paper, Updated 15 April 2026. Link: https://www.gov.uk/government/publications/national-framework-for-water-resources-2025-water-for-growth-nature-and-a-resilient-future/3-how-much-additional-water-we-need-national-framework-for-water-resources-2025