Fenton Fitzwilliam

Water has moved quickly up the political agenda.

Around 71% of England is now in drought, millions of people are facing restrictions on water use, and last week Ofwat provisionally approved a further £3.4 billion of spending by water companies on projects ranging from water security to infrastructure for new homes and data centres.

Prime Minister Andy Burnham’s response was equally direct. Customers, he said, cannot be treated as a “blank cheque”. He has also promised to look at how the public can be given greater control over water.

That sets up one of the more interesting policy tests for his new government.

How do you increase public control and keep bills affordable while still securing the investment our water infrastructure needs?

Burnham inherits a reset already underway

Burnham is not starting from scratch.

The Water (Special Measures) Act 2025 had already strengthened regulators’ powers, including tougher enforcement, greater monitoring and restrictions on executive bonuses in certain circumstances.

Sir Jon Cunliffe’s Independent Water Commission then went much further, recommending a “fundamental reset” of the regulatory system. The government committed to replacing Ofwat in England with a new integrated regulator, strengthening long-term water planning and taking a more strategic approach to oversight. A Clean Water Bill is still expected to take much of that programme forward.

But there is an important point here. Cunliffe did not conclude that the private ownership model was the issue, but that a combination of regulation, governance, planning, financial resilience and accountability measures are needed.

How Burnham proceeds to reform water is an open question, but the fact of water reform is not.

The capital question

Defra has previously estimated the value associated with nationalising the water sector in England and Wales at around £100 billion, using the industry’s regulatory capital value as a proxy and taking account of both equity and existing debt.

Critically, that figure is different from the £104 billion expenditure programme. One relates to the value of acquiring the existing businesses and liabilities. The other is the money required to operate, maintain and improve the system over five years.

Whatever the ownership model, the infrastructure still needs to be financed.

Last week’s provisional decision by Ofwat could add another £3.4 billion, including £477 million linked to additional demand from housebuilding and data centres.

That is a useful reminder of where the debate is heading.

Water is enabling infrastructure. New homes need water and wastewater capacity. Data centres and manufacturing can create significant demand. Reservoirs, treatment works and network upgrades can take years to plan and deliver.

In other words, water policy now sits squarely alongside housing, industrial strategy, regional growth and infrastructure planning.

That complicates the ownership debate further at a time when investment is needed to secure growth.

What does “public control” actually mean?

Burnham has previously said Thames Water should be nationalised and that public ownership elsewhere should remain an option. Meanwhile, 82% of Britons believe water companies should be run in the public sector.

But “public control” is a much broader phrase than nationalisation.

It could mean stronger direction over investment and resilience. It could mean changes to governance and consumer representation. It could involve greater regional involvement in water planning. And in some circumstances it could mean public ownership.

That distinction is likely to matter.

Thames Water will provide one early test of how the government approaches a company facing acute financial pressure. The forthcoming Clean Water Bill will be the wider one.

Does Burnham largely build on the regulatory framework he inherited? Or does he use it to create a more distinctive model of public control?

Those are different policy paths, with different implications for companies, investors and customers.

The question for the sector

For water companies, there is a risk in treating the current debate simply as one about nationalisation.

The more significant shift may be in what government increasingly expects the sector to demonstrate.

First, the investment case needs to become clearer. When bills and capital spending are under scrutiny, companies need to show what additional investment actually delivers for customers and communities.
Second, water needs to be part of the growth argument. The sector has a strong story to tell about the infrastructure needed to unlock housing, industry and regional development. That connection is becoming more politically important.
Third, companies need to engage with the definition of “public control” while it is still being shaped. The new regulator, the Clean Water Bill and Burnham’s approach to ownership will together define the sector’s operating environment for years to come.

The politics of water are clearly changing. But the economics remain stubbornly familiar. Someone still has to finance the infrastructure.

For companies and investors, the challenge now is to show how that investment supports the outcomes government wants: resilient supply, new homes, economic growth, environmental improvement and affordable services.

Those that can make that case clearly - and engage before the policy choices harden - will be best placed to shape what comes next.

Joe Tetlow, Associate Director