Public First for Water UK report says potential £8.5bn economic costs of water scarcity in this parliament
The Chancellor has referenced the importance of addressing water scarcity, stressing the economic cost of the issue and the role of water as an enabler of development and growth. The report states that the total cost of water scarcity if the government builds 1.3m new homes (of its 1.5m target) is £8.5bn in stifled economic growth in this Parliament.
The paper goes on to say that Water Resource Management Plans from 2024 were based on the best available data at the time, but were written before the Government announced its growth plans, and in many areas of the country there is insufficient water supply to meet the additional demand. The Government urgently needs to address water scarcity and immediate regulatory and policy change is needed alongside longer-term strategies to boost capacity.
The paper states the Government’s commitment to higher house building targets in areas that lack spare supply, will require an additional 9m litres per day which cannot be met by planned-for water supply. The impact of this demand on non-housing growth (which water companies don’t have to supply) in those areas could result in a £6.4bn loss in economic growth.
To meet housing and commercial growth ambitions the report outlines that more must be done short term to manage supply and allow for greater water efficiency at a system-wide level. Achieving growth through additional housing delivery alone without broader policy intervention to boost water supply and manage water resources will create substantial economic cost.
It urges policy makers to incorporate water efficiency into the broader short term growth strategy, and accelerate new supply options including improving water efficiency standards for new housing and allowing for non-potable water networks for non-drinking purposes. This could prevent embedding inefficiency in the housing stock and compounding the problem of water scarcity blocking growth.
AI and data centre growth, is also central to the government’s economic growth strategy, but not accounted for in current WRMPs. The economic impact of reduced water availability for water intensive cooling methods could be £1.3bn by 2030. Policy interventions could include promoting investment in closed loop and water recycling.
The paper also recommends that water recycling, rainwater harvesting, and waterless innovations, should be incentivised in the heavily water dependent agricultural sector.
In addition to housing and AI, the government’s plans include supercharging the Oxford Cambridge growth corridor, growing high density high-tech knowledge intensive industries. However the region’s water infrastructure has not kept up with housing and commercial use, causing a barrier to further growth.
Without swift and rapid policy intervention ahead of 2029, and the next WRMP planning round, the report states that water scarcity will become the main blocker to commercial development and economic growth.
