Policy paper

9. Taking action on other significant water-using sectors and emerging demands: National Framework for Water Resources 2025

Published 17 June 2025

Applies to England and Wales

9.1 Multi-sector water scarcity

Various sectors across England rely on water to keep their businesses operating and growing, depending on a combination of public water supply and direct abstraction. As these sectors expand, their reliance on a consistent water supply grows and the implications for not having access to this are significant. A report commissioned by the Environment Agency explores the water demands of key sectors and the impact of water scarcity on business stability across sectors and long-term environmental sustainability. It also examines the strategies that sectors are adopting to mitigate risks and provides recommendations to support future resilience.

The way in which sectors utilise water varies. England’s 2,200 golf courses consume about 490,000 litres daily in summer for irrigation with over 60% using potable water. Maintenance involves frequent irrigation, fertilizers, and pesticides, leading to environmental and economic costs. The chemical sector is a significant consumer of freshwater, using water for processes like distillation and cooling. Data centres require significant amounts of water for cooling servers. Large centres can consume millions of litres daily, with water use rising in summer. Meanwhile, concrete production accounts for 9% of global industrial water withdrawals as water is essential in the chemical reactions that harden cement.

For each sector that utilises fresh water, a reduction in water availability will have consequences. Higher costs and a reduction in quality of maintenance would have a significant impact on golf courses and could have a subsequent effect on the availability of community-run courses due to a lack of additional resources. Water shortages can lead to operational disruptions in the chemical sector, affecting production processes that rely on freshwater. This, in turn, can impact other sectors dependent on chemical products, leading to increased costs and supply chain disruptions. Data centres require significant amounts of water for cooling. A lack of water can force data centres to rely on less efficient cooling methods, increasing energy consumption and environmental impact. This can also lead to operational challenges and higher costs. Water is essential for the chemical reactions that harden cement. A shortage of water can affect concrete production, leading to delays and increased costs in the construction industry.

9.1.1 Barriers to water efficiency in other sectors

Sectors across England are beginning to show a growing awareness of water resources but are not necessarily at the stage to engage in water resources planning. The monitoring of water usage is not yet a priority, but it will need to be to ensure resilience to future changes. Research and engagement with key water using sectors has identified several barriers to improving water efficiency including:

• Cost and investment: The current water pricing structure, where water becomes cheaper with higher usage, discourages reductions in demand. This dynamic mirrors the energy sector, where significant behaviour changes only occurred after substantial price increases. For non-household customers, water does not constitute a significant operational cost, leading to limited incentive to invest in water-efficient measures. The return on investment is often perceived as insufficient. There are insufficient incentives for businesses to adopt water-efficient practices compared to energy efficiency measures, where the financial benefits are more immediate.
• Awareness: There is a lack of awareness about water scarcity and the need for water-efficient practices among non-household customers. Misconceptions about water availability further contribute to inefficient practices.
• Governance and coordination: There is fragmented water management for non-household sectors, with multiple entities responsible for different aspects which complicates coordination and the implementation of water efficiency measures. A lack of coordination between sectors and local authorities due to differences in scales, timelines, capabilities, and risk cultures further exacerbates challenges in water management.
• Organisational changes: Different sectors have diverse water use requirements, making it difficult to reach a consensus or speak with a unified voice. A lack of shared language and understanding among sectors hinders engagement and creates challenges in translating information across organizations. Aging water infrastructure presents significant challenges and substantial investment, and innovation are needed to address leakage and diversify water sources for other water using sectors.
• Regulatory barriers: Implementing changes to the current water pricing structure requires robust government and regulatory support. For example, removing falling-block tariffs and increasing charges for large water users necessitates revisions to existing regulatory charging principles. Stricter regulations require sectors to adapt to new standards, invest in technologies, and develop alternative supply sources.

Addressing these barriers will require a coordinated effort from regulators, government and industries themselves.

 9.1.2 Looking ahead for other water using sectors

Several recommendations have been identified to address the challenges of water scarcity across sectors in England. The key starting points being clarity of need and incentives to report across all sectors.

Community engagement including collaboration to integrate sustainable water management in urban planning will be key to managing future growth. Engagement can also be utilised to promote nature-based solutions and increase awareness. There will need to be funding and incentives for growing sectors to implement water-saving initiatives. This extends to small businesses and community organisations where a grass-roots approach could empower communities to take ownership of their water management within the margins of wider regulation.

Collaboration will be a key element to the future of water management and resource allocation. This collaboration will need to be cross-cutting between both water-using sectors themselves and with regulators.

The next steps will be to work individually with these sectors to towards building a better picture of water need and establishing a clear pathway towards water awareness and resilience.

 9.2 Water for navigation

The navigation sector is a major user of water and has a unique place in water resources planning. The Canal and River Trust is the dominant user of water in this sector but is not the only navigation body.

The Trust is not just a user of water to maintain water levels in its canals; it is also a supplier of water to third parties from its canals and it is a conveyor of water in current and proposed and potential future transfer schemes to support public water supplies.

Given its role in supporting national critical infrastructure for water (and potentially for energy), and that its size of operation is comparable to a medium-sized water company, we expect the Trust to have robust water resources plans and drought management plans in place which have similar levels of public transparency, consultation and scrutiny as the plans of water companies.

These plans should look at current and future demand, should consider how existing supplies are likely to change and the options available to address any supply deficits. They should show how: the Trust manages the demand of water to ensure its efficient use, including in drought periods; how leakage and losses are minimised and reduced; and the best value options for any improvements needed for water supply resilience.

We want the Trust to continue to actively explore how it can support future solutions to improve water supply resilience across all sectors of use.

9.3 Water for the chemical industry

The chemical industry is responsible for providing products which are critical to a wide variety of business operations, including energy production, pharmaceuticals, construction and water treatment. Water is essential to the chemical sector for a variety of uses, not just as a raw material but also for cooling processes, environmental protection and to prevent major safety incidents.

Growth in the chemical sector would lead to an increased demand for water. Businesses should therefore consider how their demand for water is likely to change in the future and plan for how their needs can be met. They should work to identify options to address any supply deficits.

Consideration also needs to be given to the water requirements of any changes to operations and water availability should be considered when new businesses are being planned.

We will continue to work with key stakeholders in the chemical sector to understand more about their current and future water needs, and to keep abreast of changes in the sector that may impact their demand for water.

9.4 Water for data centres and artificial intelligence

Data centres are fundamental to growth, industry and society. They are increasingly important in our day to day to lives, so much so, that they are now classed as Critical National Infrastructure. Data centres store information ranging from medical records to photos on your phone. They also support many online services, from artificial intelligence (AI) to managing email and messaging. As the use of AI increases and government encourages overseas investment, this will also generate greater demand for data centres. Data centres can require a large amount of water for cooling processes and there is the potential for a new large demand as more data centres are built.

Water availability needs to be considered when data centres are being planned, and consideration given to the water requirements of the cooling technology selected as well as where the data centre is being located. There are many ways of cooling data centres. Water cooling systems can be open or closed loop, with closed loop systems being more water efficient. Direct to chip liquid cooling systems, using either water or a special liquid coolant, are also gaining popularity. Air cooling systems are likely to be used less frequently as chips in data centres are becoming hotter.

While many data centres will look to water companies for reliable provision of water supplies, there are also opportunities to explore using water abstracted directly from the environment as sources of water for cooling. However, neither of these sources are guaranteed as water companies use supplies to ensure resilience for customers, and some catchments are already closed to new abstraction. Some water companies have already refused applications for water from data centres. Instead, data centres will need to look to other sources of water for supply, for example use of water recycling or collaboration with other water users.

We want to continue to work with stakeholders to understand how water resources planning for data centres can be developed, for example, whether there should be a requirement for proposals for new data centres to include an assessment of a range of options such as the reuse of water or closed loop systems. Closed loop systems are already in use, for example in some data centres in Italy and the Netherlands.

We are currently working with key representative bodies to collect data from the sector to increase our understanding of their current and future water needs. However, we are experiencing barriers in gaining information about water consumption. Other sectors who are working with data centres have reported the same issues. Data is vital for long term planning and identifying opportunities for collaboration between sectors and without it we are unable to accurately model or predict future water needs. There are large variations in water use within the sector and more transparency is needed to aid our understanding. We will also be working across government departments to develop policies around data centre sustainability. In addition to this, we are assisting MOSL to access the information required to produce a dashboard to display data centre water consumption.

Data centres will need to work with regional groups to ensure that any current and future water demand is forecast and planned for appropriately.

The government has committed to a 10-year investment commitment in AI infrastructure, beginning in Spring 2025. This will include the creation of AI growth zones (AIGZs). AIGZs will have enhanced access to power and support for planning approvals, enabling faster development. As AI develops and improves, this will increase computational operations which could potentially require greater data and cooling. It is also likely to result in a large and rapid increase in the number of data centres in England, with many being built by 2030 and before the large strategic water resource options have come online. It is therefore critical that water availability is considered early in the planning stage, not just for data centre cooling but also to provide water for potential power sources such as Small Modular Reactors (SMRs).

9.5 Water for health and wellbeing

Water for health and wellbeing includes leisure uses for golf courses, horse racing and sports fields. This is an important sector of water use that supports a significant part of the economy and enhances people’s mental and physical health. Water supplies for this sector come from a mixture of sources; sometimes from small scale abstraction below the thresholds for abstraction licences; sometimes from the water environment where a licence is required; and sometimes from water company mains.

The leisure sector is facing similar pressures as other sectors in that the availability of water resources for direct abstraction from the environment will be impacted by climate change. The demand for irrigation may increase due to hotter, drier summers and there will be changes needed to some abstraction licences to ensure they are sustainable.

Opportunities may exist for the sector to switch from mains supplies to direct abstraction from the environment or water cycling, which could help secure a better use of water resources. Water other than for domestic use in this sector does not depend on the same high-quality potable drinking water as that required for public water supply. Some water companies are already driving such change by removing guarantees to reliable supplies from mains connections as pressure on their networks grow.

Where sustainability changes are needed to abstraction licences, there is a risk that water from the environment may not be available or reliable unless it involves the capture and storage of water from sources such as high flows, rainwater harvesting, drainage, or if there is access to non-rainfall-dependent supplies like treated wastewater.

We will continue to work with the leisure sector to increase awareness of the growing risks and pressures on water supplies. We also want to help with assessment of local options available to improve water supply resilience, particularly where this is associated with reducing reliance on the use of public water supplies. To do this, we believe that the approach used in the agriculture and horticulture sector is transferable to the leisure sector. This would involve a move towards involvement in Water Abstractor Groups, representing multiple sectors of use, and assessments of local resource options, including opportunities to share water and to trade water rights.

We see a role for regional water resources groups to help to facilitate this work by helping businesses in the sector assess their risks and spot opportunities, and by advising on potential options and the implementation of solutions. As part of this, we want the sector to consider how it may help support the delivery of wider benefits to water and the environment. For instance, making use of opportunities to utilise land to deliver nature-based solutions and wider benefits to water quality and flood risk management as part of the solution to improving water supply resilience.

We also want to work with the sector to help it continue to develop and adopt best practice in water resources management, improving demand management, irrigation scheduling and how smart data can optimise use.

9.6 Water supply for flood alleviation

The use of reservoirs for multiple purposes has been around for decades, if not centuries. Whilst each reservoir will have a primary purpose, we want to ensure that, where possible, integrated decision-making leads to multiple benefits and aligns with adaptive planning principles.

We want to make sure that careful consideration is given to opportunities to deliver those benefits and that we are not introducing adverse outcomes, such as unacceptably reducing the security of water supplies. We have produced a decision-making framework to enable consistent local choices when considering proposals, where the ‘integrated’ management of reservoirs for flood risk and water supply purposes presents a combined opportunity without impacting on water supply resilience and levels of service.

The decision-making framework helps the alignment between water resources planning and flood risk appraisal principles, so outcomes are practical, deliverable, legally compliant, meet environmental objectives and obligations, and can support clear communication with local stakeholders and interested parties, whilst reflecting wider challenges such as the impacts of climate change and the need to manage water dynamically.

We will continue to explore opportunities so that they are considered within a strategic, catchment context, and so that priorities align with water resources plans and flood risk plans.

Next: 10. Water resources planning and abstraction licensing