The UK’s water sector is facing an urgent call for "root and branch reform" following a new report from Parliament’s Environment, Food and Rural Affairs Committee, which warns that privatisation, financial mismanagement, and weak regulation have left the sector failing both customers and the environment.
“The water sector has a serious culture problem,” said the Committee Chair. “Water companies are the keepers of a vital national infrastructure. They exist to provide an essential service to the public and to protect the environment. But these primary functions seem to have been forgotten.”
The Committee’s Priorities for water sector reform report criticises the industry for operating more like financial institutions than businesses servicing monopolised critical infrastructure. MPs highlight that “privatisation has almost certainly weakened the accountability of the water industry to the public”, with vital data on performance, environment, and finances often withheld. The Committee demands that companies be legally required to publish this data regularly to restore public trust.
The report also exposes “serious economic mismanagement” in the sector, fuelled by unsustainable debt levels. MPs call for strict new regulations on debt accumulation and management, warning that “a culture of relying on debt must never be allowed to arise again.”
On the controversial issue of special administration — government stepping in to run failing water companies — MPs describe it as a last resort due to high upfront costs. However, they caution that “it is unclear whether allowing a failing company to struggle on and accumulate progressively more debt is a better outcome than assuming temporary national control more quickly.”
The regulatory system itself comes under fire for failing to incentivise critical infrastructure investment. MPs warn that weak regulation has compromised both short-term resilience to asset failures and long-term water security, particularly as population growth and climate change increase drought risks in the South and South East.
“If the price review process is to be retained, it needs to be reformed,” the report states. MPs want the Commission to overhaul the process to promote resilience and protect customers from shocks, while safeguarding future water resources.
The report also highlights poor customer service and calls for statutory standards, better crisis communication, and a single social tariff to support vulnerable households.
“The Water Commission has got the opportunity to draw up the root and branch reforms necessary to ensure that the issues plaguing the sector are resolved. It must not shy away from bold proposals,” the Chair concluded.
The Committee will present its findings to Water Commission Chair Sir Jon Cunliffe on 17 June.
