Ahead of land, consent or even capital, it is the supply and treatment of water that is impacting the growth of housing, renewables and digital infrastructure in many areas. In an Expert Focus article for WaterBriefing, James Cattermole, ​​​​Partner - Infrastructures at Carter Jonas takes a look at water as a limiting factor on economic growth.

James Cattermole: When a development stalls, the first assumption is usually that the delay is in the planning process, or because the viability doesn’t stack up. But increasingly, the reason is water supply.

Drought and flood risk have always been factors associated with new development but a more recent issue is the uncertain supply of potable water, or the absence of a means of managing wastewater. This calls for a more joined-up approach between development and water availability.

Impacts on housing delivery

North Sussex is a reminder of how quickly a technical constraint becomes a growth constraint. Natural England’s water neutrality position in 2021 effectively stopped many developments from increasing mains water demand across parts of the Sussex North zone. The restrictions were withdrawn in late 2025 after a negotiated solution, with government communications framing it explicitly as a way to unlock stalled housing.

But the issue is appearing elsewhere too. In Oxfordshire the Environment Agency challenged planning applications for new housing over concerns about sewage treatment capacity which posed a risk to water quality if developments had gone ahead as planned and no fewer than 18,000 homes were affected. Examples exist across the country: 9,000 homes and 300,000 sq m of commercial space delayed in Cambridgeshire; and a moratorium restricting new mains water connections for non-domestic purposes in the Essex & Suffolk Water region.

The future impact of data centres

A further example is water availability being raised as a material constraint on a proposed data centre in Elsham Tech Park.

Data centres are unarguably and important element of the country’s future economic prosperity, but they require considerable – and yet currently unknown - quantities of both water and power. In July 2025 the Environment Agency reported that England’s public water supply could be short by 5bn litres a day by 2055 without urgent action to future-proof resources, with a shortfall of a further 1bn litres a day for farming, energy generation and powering emerging technologies.

And yet this figure of 1bn for industry did not include the amounts of water to be used by data centres. The Environment Agency forecasts water deficit projections on a five-yearly basis, but reported difficulties in 2025 because of the growth in AI, which is one of the most significant changes to projected usage. The majority of data centres use the public water supply rather than alternative sources and demand is set to increase substantially as their growth continues: there are currently approximately 500 data centres in the UK with the figure set to rise by almost 20% in the next five years according to Barbour ABI. More than half of the new data centres are set to be in ‘water stressed areas’ including London, and the home counties.

The bigger picture

Professionals will already know of these examples and others. They will also know that in many cases partnership working and mitigation schemes have successfully resolved localised issues. But a case-by-case solution is rarely the most efficient. We must address the more significant point, that water has moved from an operational concern to a barrier to development and investment.

So it’s time that water is considered as structurally important to economic growth as housebuilding targets, clean power and industrial strategy. It is, after all, enabling infrastructure and without it, the rest becomes aspirational.

Strategic reservoirs and the NSIP route help, but they are not the whole answer

The government’s commitment to bringing forward nine new reservoirs by 2050 is very welcome. These reservoirs could provide 670 million litres a day of extra water.

More importantly, two schemes, in East Anglia and Lincolnshire, hold the Nationally Significant Infrastructure Project status, which moves consenting into the Planning Act 2008 regime and the Development Consent Order process. That is significant because the NSIP process was designed to streamline decision-making for major infrastructure, with a clearer route through examination and a single consent that can include powers such as compulsory acquisition where justified.

That said, the DCO route is by no means a total solution. The NSIP regime can reduce some planning friction, but other challenges remain, including environmental impact assessments, public and statutory consultation and negotiations with landowners. And as infrastructure development, boosted by the government’s welcome focus on renewables, increases, so does public scepticism about changes to land use.

A faster consent is useful only if it sits within a delivery model that can be financed, procured and built with discipline.

DPC is becoming a serious investment proposition

This is where Direct Procurement for Customers comes in. Ofwat describes DPC as a model in which a water company competitively tenders a major project and appoints a Competitively Appointed Provider to design, build, finance and in some cases operate and maintain.

The logic is familiar to anyone who has watched other infrastructure sectors mature: separate the project, procure competitively, allocate risk explicitly and create a long-term contractual revenue stream that can attract a broader pool of capital. Ofwat’s own briefing note is clear that it expects a long-term CAP agreement with a revenue stream paid to the provider.

This is an effective route by which pension funds and other long-duration investors can participate in water resilience with returns linked to asset availability and regulated outcomes rather than volatile commodity prices.

It is particularly timely as the sector is entering a major build period, as is outlined in Ofwat’s April 2025 report. Its PR24 final determinations support £104 billion of spending over 2025 to 2030, which is presented as the opportunity to deliver long-term water supplies and resilience alongside environmental improvements. Combine that scale of investment with competitive delivery routes, and the picture improves, presenting a pipeline that can be planned, financed and industrialised.

The Independent Water Commission and regional responsibility

The Independent Water Commission’s final report (July 2025) recommends a more integrated regulatory framework, stronger system planning and a long-term vision that drives delivery rather than reacts to crises.

Specifically, it proposes more comprehensive systems planning with regional responsibility and a clearer focus on resilience, including better understanding and mapping of assets. This is significant as far as investment is concerned, because uncertainty is often the greatest cost: investors can price construction risk and operational risk but they struggle to price the “unknown unknowns” created by poor asset data, fragmented governance and unclear accountability.

Next steps for the water industry

In 2026 the water sector must prove it can translate urgency into delivery in a way that keeps capital engaged. It must contend with public sector cost pressures, which in turn creates a larger role for private finance and private delivery - but only if projects are investable on their own merits.

In practice, that requires a credible sequence of projects with clear milestones, realistic timetables and defined dependencies; a renewed emphasis on data to reduce programme risk and strengthen the evidence base that planning and environmental processes now demand, and alignment between the DCO and DPC processes. DPC does not replace the NSIP regime.

Timing remains an issue: five-year election cycles do not fit 25-year delivery cycle. And there is also a need for an overarching plan to introduce renewable energy to the power mix for water companies, as water infrastructure itself is energy intensive. In our own work for water companies distributed generation and local power procurement are increasingly part of the resilience toolkit which aims, in the case of Yorkshire Water, to increase the use of renewables from 20% to 80% by 2040.

Conclusion

We’re seeing significantly more activity than we did five years ago. But the test is achieving the accelerated delivery that is required. Water is central to housing delivery, the Net Zero transition and the data-driven economy. If we treat it as such, we can fund and build what is needed.