Ofwat has published the Water Innovation Fund annual report 2026 - the Fund is a £600 million programme running from 2020 to 2030, designed to help the water sector deliver better outcomes for customers, communities and the environment through innovation.

The report provides an overview of the past year of activity across Ofwat’s Water Innovation Fund and the Water Efficiency Lab (part of Ofwat’s Water Efficiency Fund). It highlights key achievements, sets out progress across programmes and projects, and reflects on the learning that is shaping how the Fund continues to evolve.

The Water Innovation Fund is a £600 million programme running from 2020 to 2030, designed to help the water sector deliver better outcomes for customers, communities and the environment through innovation.

The aims of the Water Innovation Fund are to:

• accelerate the development and adoption of innovative products, services and approaches;
• strengthen the sector’s capacity and capability to innovate; and
• embed a culture that values, supports and learns from innovation

The Fund is financed through a ring-fenced allowance collected from water companies and awarded through competitions and targeted programmes.

What began as a single competition has grown into a broader portfolio of challenges, thematic programmes and support mechanisms, shaped by evidence, experience and feedback from across the sector. This now includes the Water Efficiency Lab (WEL), a dedicated programme focused on accelerating innovation to reduce water demand.

The WEL is part of Ofwat’s £100 million Water Efficiency Fund (WEF), which is designed to support a sustained and measurable reduction in water demand across England and Wales through a range of approaches, including awareness raising and behaviour change. The WEF also includes a Water Efficiency Campaign (WEC), which will encourage people and businesses to use less water.

Key activities highlighted in the report include:

Water Breakthrough Challenge competition - funded a new cohort of 19 projects worth £58 million, while seeing eight previously funded initiatives reach completion – some now progressing from concept into real-world application.

Launch of the first Water Efficiency Lab - part of Ofwat’s Water Efficiency Fund, examining how the effective use of data can unlock more efficient water consumption and support long-term demand management.

Water Discovery Challenge - 315 entries entered the latest round, with 20 finalists set to be awarded up to £100K each in July 2026

Regulation 31 Laboratory bottleneck stage 1 winners - Eight out of 12 entries to the first Water Innovation Implementation Programme’s Reg 31 Challenge have been awarded £50,000 each to develop a detailed plan for setting up new Reg 31 laboratory capacity. Finalists/Winners will receive up to £1m to implement their plans

First and second Water Innovation Missions selected - ‘Chemicals of concern’ has been selected as the first mission to concentrate innovation effort on the water sector’s most complex challenges and encourage coordinated action across organisations, disciplines and sectors. A second Mission, ‘Managing Rainwater Better’, is now being planned and will launch in 2027

First Water Efficiency Lab winners awarded - 60 entries entered the first round, with seven projects awarded a share of £5.2 million

Projects completed - Eight more projects completed this year, bringing the total number of completed projects to 45

New barrier selected for Water Innovation Implementation Programme - Unblocking slow and complex procurement and onboarding processes selected as the second barrier to help promising innovations progress to wider implementation across the sector

Water Innovation Cross- Sector Programme - Launch of the Water Innovation Cross Sector Network – Ofwat will be recruiting a new delivery partner for the Programme after Innovate UK stepped down

The report also makes the interesting point that some of the most valuable insights have come from where projects have not gone to plan - one of the projects concluded early, unable to meet its intended outcomes. These experiences have sharpened understanding of what it takes to deliver real impact: strong partnerships, rigorous challenge, adaptability, and a clear pathway from idea to scale. This reinforces a key principle of innovation: experimentation inevitably involves uncertainty, the report says.

Introducing the report, Helen Campbell, Interim Executive Director, Delivery said:

“Looking ahead, the years to come will demand innovation at an unprecedented scale. From major infrastructure such as nine new reservoirs to the transformation of how systems are designed, built and operated, success will depend on combining capital investment with new approaches, technologies and ways of working. At the same time, a stable and credible regulatory environment will remain essential to attracting the long-term investment on which the sector depends.”

Interim evaluation findings says that evidence suggests that the Fund is functioning as intended and is making positive progress towards its objective of stimulating and supporting innovation across the water sector particularly around collaboration, progressing innovation maturity and additionality. Challenges remain around adoption and scale. The final impact evaluation and value for money study for the 2020-2025 Innovation Fund will be completed in May 2027

Click here to download the Water Innovation Fund annual report 2026

Click here for more information about the Water Innovation Fund