UK ministers explore raising price of water for some users amid shortages

Environment Agency says talks under way about increasing prices for industrial users to try to reduce poor water management

Ministers are exploring making water more expensive for some users, in the face of severe supply shortages.

Despite the UK being a famously wet country, the precarious nature of the water supply has been made particularly acute this summer, with almost three-quarters of England and all of Wales in drought and 27 million people facing restrictions on their water use.

As the climate crisis worsens and demand for water increases, the Environment Agency has estimated that, without action, England’s water supply could be short by 5bn litres a day by 2055.

Helen Wakeham, the director of water at the Environment Agency, said that to plug this severe and growing gap, the value of water needed to increase.

“If someone wants an abstraction licence from the Environment Agency, what they pay for is the cost of producing the licence. They don’t pay anything towards the value of that water,” she said.

While millions of households in England are paying record levels for their water bills, Wakeham said that, for big industrial customers, the more water they used, the less they paid.

There was a “lively conversation” going on about whether we could “completely reframe the way we value and pay for water”.

“It’s the beginning of a conversation, but ministers have asked us to look at the value of water and how our abstraction licensing system works,” she said.

The Guardian recently revealed that less than 1% of businesses in England use more water than the daily needs of 10 million people. Some of these businesses, which include oil refineries, chemical plants and paper mills, face no requirements to cut their consumption.

With the government committed to make England an AI superpower, there are also questions about where water-hungry datacentres will get their resources from. Water UK, the body representing the UK water industry, warned the UK would not have enough water for future datacentres.

“The reason datacentres are water-hungry is because water is so cheap,” said Wakeham.

Dr Doug Parr, Greenpeace UK’s chief scientist and policy adviser, said: “Every day, people are doing their bit to save water, but they are being hit with higher bills and hosepipe bans while big business gets cheap water access. At a time when the country is facing water stress due to climate change, it is absurd that major companies have access to water that is cheaper for them, per litre, the more they use. This has to change. The whole abstraction policy and licensing needs to be rewritten from a blank sheet of paper to make it fit for a country facing summer droughts and a biodiversity crisis.”

Environment Agency permitting means datacentres are required to use drinking water only. Water UK has estimated that datacentres in England use 6.6m litres of drinking water every day. With the government’s ambition to triple datacentre capacity by 2030, this could increase to 19.8m litres a day. Jon Chappell, the trade body’s deputy director, said this was “unforgivable” and a “genuine failing of government”.

Wakeham agreed there was an issue with drinking water being used for cooling and industrial supply, and said the agency was “working with the government to look at different ways of pricing and valuing water to make sure that the right water goes to the right places”. She said this could result in water becoming more expensive for industrial users.

“The overarching message is that water is so cheap that often it’s not managed, because it’s cheaper just to use more water,” Wakeham said.