Everything you need to know about UK water reforms

Last year the Independent Water Commission published its report (the Cunliffe Report) into the water sector, which recommended a key change in how the sector is regulated. This was followed by the publication of a white paper in January, so 2026 looks set to be a significant year for reform in the sector.

Based on the Cunliffe Report's findings, the government committed to scrap Ofwat and introduce a new super-regulator for the water sector. The regulator will take on the water-related functions of Ofwat, the Environment Agency (EA), Natural England and the Drinking Water Inspectorate.

The Cunliffe Report also identified a number of key issues that should be addressed to ensure a sustainable water system can be maintained for years to come. Its 88 recommendations to transform the water sector include the following.

• The development of a National Water Strategy with a minimum 25-year forecast, including five- and ten-year milestones with a clear framework addressing current and future water needs across all sectors.
• Shifting planning duties and resources from regulators to nine independent regional authorities, with representation from stakeholders such as local government and health, environment, agriculture and consumer groups.
• Reforms to the Water Framework Directive (WFD) and the Urban Waste Water Treatment Regulations (UWWTR) and potentially an extended producer responsibility scheme for funding improvements.
• Stronger operator monitoring, better use of technology such as AI for sewage and pollution tracking and tighter enforcement on water standards and management.
• Greater redress for consumers.
• Ensuring water company returns do not compromise public interest, by introducing minimum capital requirements, increasing regulatory powers and transparency to boost investor confidence, aligning governance with statutory guidance, and allowing the new regulator to block ownership changes if not in long-term sector interests.
• Mapping water company assets, shifting to forward-looking health measures, and setting resilience standards.
• Adopting stricter pollutant controls to deal with unknown risks and safeguard public health and water systems.

Having announced early on that it would take forward some of the recommendations, the government's detailed response to the report, expected in autumn 2025, was finally published on 20 January as the white paper A new vision for water. 

It highlights that the government's three main goals in reforming the sector are to provide safe and secure water supplies, protect and enhance the environment, and ensure fair outcomes for customers and investors.

The reforms are split into seven themes in the white paper.

• Providing a new long-term direction for the sector. This theme aligns with the Cunliffe recommendation to use a five-year strategic guidance cycle, supported by the new 10- and 25-year reviews. The aim is to replace fragmented planning with two streamlined frameworks: one for water supply and one for the water environment. The government also affirmed its intention to reset the legislative framework, predominantly the WFD and the UWWTR. 
• Resetting regulation by establishing a new, integrated water regulator, which will be an amalgamation of the relevant water system functions of Ofwat, the Drinking Water Inspectorate, the EA and Natural England. Plans include new enforcement powers for the new regulator, a new Performance Improvement Regime for underperforming water companies and obligations on third-party contractors. Other reforms include ending operator self-monitoring and introducing a new open monitoring approach for wastewater.
• Attracting private investment, by making the sector more attractive and reliable for investors. 
• Putting customers first, by creating a new independent water ombudsman, safeguarding drinking water and increasing consideration of public health.
• Investing in storm overflows and wastewater treatment to reduce unauthorised discharges.
• Improving water security, by enhancing asset health, streamlining infrastructure delivery and maintaining more resilient infrastructure. Reforms include plans to shift the focus from enforcement of pollution incidents to stopping pollution at source by investing in pre-pipe solutions to support wastewater management earlier in the process. These will focus on rainwater management, sustainable drainage and tackling sewer misuse, all overseen by a new chief engineer. 
• Committing to a transition plan, to lead the sector through the reforms. Much of the detail on how the reforms will be implemented is expected to be in the transition plan, which is due later this year.

It is important to note that not all the reforms will apply in Wales. For example, the Welsh government has announced that it will not follow England's lead and instead will keep the economic regulation and environmental regulation of the water sector separate.

Other legislative reforms, including bringing the abstraction and impoundment regime, as well as intensive cattle farming, into the permitting regime will also likely increase regulatory burdens associated with these activities. Permit application delays could further complicate any transition. 

Second, the consolidation of the existing framework into stronger and clearer standards for agricultural pollution, to address what the Cunliffe Report identified as the sector having the 'most significant environmental impact', will have major implications for farmers and estate owners. 

The new framework will dictate how land, soils and crops are managed and will, where necessary, integrate best practices into the regulations. Given that about 90% of land use in Wales is agricultural, any water system amendments could substantially alter the landscape.

The government has also expressed its intention for there to be targeted use of the Environmental Land Management schemes, using funds for water system priorities. The extent to which this diverts funds from other ELM schemes remains to be seen. 

In terms of impacts on property, the shift in focus to pre-pipe solutions will entail increased rainwater management. This will affect the built environment, particularly for commercial and industrial property, where rainwater reuse will be encouraged. 

Separately, the government has expressed its intention to deal with private sewerage issues, which could mean substantial costs for rural homes and estates if they have to foot the bill to rectify pollution caused by these issues. 

Broader planning reforms will affect land use. These include: 

• use of the Water Delivery Taskforce to promote and drive building, support planning and facilitate greater water company input into the planning regime
• review of permitted development rights for water companies in England. 

The government has also indicated support for large infrastructure projects such as new reservoirs and water transfer schemes, many of which will involve complex property, planning and environmental considerations. The government is also supporting smaller infrastructure developments, such as on-farm water storage and any works required to comply with pollution control measures under the permitting regime.

Water sector reforms will have significant knock-on effects on land use and management and, if and when taken forward, will impact farmers, landowners, businesses and nature groups across the length and breadth of the country. It will be interesting to see how the Land Use Framework, when it is published, will interact with the proposals.

DEFRA seems to prefer the first option, and the water industry national environment programme (WINEP) has long been indicated as a planned reform. While there are benefits to regulating sewage sludge under the permitting regime, it should also be acknowledged that greater regulatory burdens could potentially deter landowners from making land available.

The EA recently consulted on proposals to strengthen civil penalties for water companies pursuant to powers it was granted under the Water (Special Measures) Act 2025. Proposals included: 

• introducing variable monetary penalties (VMPs) to a civil standard for a number of offences under the Environmental Permitting (England and Wales) Regulations 2016 and the Water Resources Act 1991
• expanding the current requirement to report significant pollution incidents category 1 and 2 to all pollution incidents.

The EA has also announced that it will consult on updates to its Enforcement and sanctions policy in due course.

If implemented, these changes could significantly increase water companies' exposure to high-value fines. The consultation closed in December 2025, and we await a summary of the responses and the EA's response.

It remains to be seen if, when and how DEFRA, the EA and Ofwat will implement the recommendations made by the Office for Environmental Protection following its review into whether those authorities had fulfilled their statutory duties in regulating combined sewer overflows. 

Following the Cunliffe Report and the white paper, it is unclear whether these recommendations still stand, and we await further details on their status. 

In addition, last year AMP 8 was introduced – the new regulatory period for water companies from 2025–2030. That will have implications for Environment Performance Assessments and the delivery of WINEP and price review commitments. 

In Scotland, the Scottish Environment Protection Agency is gathering views on water management issues in its Safeguarding Scotland's water environment consultation. Topics include wastewater and sewer management, chemicals in water and water use and scarcity. 

The consultation closed on 3 March, and it remains to be seen how future Scottish water policy may align or diverge with that of the rest of the UK.