Water bills are expected to rise by 30% over the next five years, according to a new report that highlights growing pressures on Britain’s water infrastructure, including the rapid expansion of data centres to power artificial intelligence (AI).
The report, led by Sir Jon Cunliffe, a former deputy governor of the Bank of England, recommends the abolition of Ofwat, the UK’s water regulator, and calls for a complete overhaul of how the water industry is governed.
Speaking to BBC Radio 4’s Today programme, Sir Jon said that rising costs for drinking water production and wastewater treatment are unavoidable. He cited growing demand from population increases and the water-intensive requirements of AI data centres as key drivers of higher prices.
“When you look at the pressures on the water system, population growth and the need for new data centres, these developments place significant strain on water resources,” he said. “We have to accept them, but we must plan for them, set clear priorities, and manage the trade-offs. At the moment, that simply isn’t happening.”
His report points to a lack of coordination between national infrastructure planning and the water industry. One example is a planned AI data centre at a former Ford factory in Bridgend, Wales, which is still awaiting approval. The report urges closer consultation with infrastructure experts before approving such projects, especially given their high-water needs. Research from Oxford University was cited, warning that regional water stress must be a critical factor when locating data centres.
The report has prompted a strong response from the Government. Environment Secretary Steve Reed described the current regulatory system as having completely failed, announcing plans to scrap Ofwat as part of what he called “the biggest overhaul of water regulation in a generation.”
Speaking in south-west London, Mr Reed said: “Our rivers, lakes, and seas are polluted with record levels of sewage. The industry is broken, and the regulator has let them get away with it. Today marks the start of a water revolution.”
Water Minister Emma Hardy also weighed in, criticising water company executives for awarding themselves huge pay rises” while public trust in the industry hits an all-time low.
“Everyone knows the system is broken,” she told the media “I’m not saying government should set private sector salaries, but I will say this: read the room. People are angry and fed up.”
Trade unions have echoed those concerns. Gary Carter, national officer at the GMB union, accused water company bosses of profiting while neglecting infrastructure and allowing sewage to flood rivers.
“It’s a disgrace and one that Ofwat has overseen,” he said. “It’s time for fundamental reform of the sector, and for the water industry to be brought back into public ownership.”
The report and the government’s response come amid increasing public frustration over water pollution, rising costs, and underinvestment in the sector. With AI and digital infrastructure expanding rapidly, the challenge of balancing innovation with environmental sustainability and public affordability is becoming more urgent than ever.
