Is water just the problem of the water industry?

Water is the quintessential systemic resource which no single actor, including water companies, can manage alone. Vicky Vanderstichele argues that the water sector in the UK is in crisis precisely because it has sought to look at water as an isolated issue rather than as part of a system. Can we look at water in a completely different way?

In recognition of the issues besetting the water industry, the UK Government has asked Jon Cunliffe , formerly deputy governor at the Bank of England, to perform a review of the water industry and provide recommendations to the UK Government.

We at North Star Transition, building on our work on the funding and finance workstream of the Ofwat Innovation funded programme for Mainstreaming Nature-based Solutions, have considered broader issues within the water sector, both in terms of moving beyond considering water as an isolated issue and important structural changes within the water industry. This blog focuses on the former while a second piece addresses the latter issue.

Water as a silo

Cunliffe’s Review acknowledges that the water sector suffers from a siloed approach, stating that “many stakeholders increasingly emphasise the importance of managing water as a system.” However, this is only a partial statement of the problem. There is no doubt that managing water as a system will become increasingly important.  Pressures from climate change are reducing not only the availability of potable water, but also threatening the integrity of our rivers, wetlands and groundwater systems.

But, more profoundly, there needs to be a recognition that water is fundamental to our broader economic system and that it should be managed effectively by all actors and sectors, not just the water sector.  Water is a foundational input across all major economic systems, including agriculture, energy, industrial production, urban development and transportation infrastructure. Each of these sectors both relies on and impacts water resources, meaning water must be managed as a shared economic resource, not as a siloed concern of the water sector alone

However, there is currently a lack of connectivity across water, environment, food, health, energy and transport. Yet all depend to a lesser or greater extent on water quality and supply. In North Star Transition’s work, we see time and time again that a siloed approach creates, perpetuates and exacerbates problems. The way in which the water industry is currently attempting to lift itself out of crisis is emblematic of this. Here are a few examples taken from headlines over only the last few months.  

“Only Rainwater” in Lake Windermere. A feasibility study has been requested to “clean up” Lake Windermere with the potential of building a 48km tunnel diverting sewage away from the lake.  However, this potential infrastructure fails to address the issue of agricultural run-off in the lake or the legacy sedimentation within the lake. It also places the burden for a healthy lake completely on the local water company, United Utilities, and its sewage infrastructure, when in fact there are many actors who have contributed to the current state of Windermere.

£1 million for the River Wye. The Welsh water minister has announced a £1 million government research programme to transform the River Wye. Much work has already been done in understanding why the River Wye is polluted. It is clear that it is a cross sectoral issue with agriculture playing a significant role. Yet, agricultural practices sit outside the remit of water companies. Thus, all that seems currently possible is “research” rather than action.

Urgent demand reductions. Steve Reed, secretary of state for DEFRA, has recently stated in a speech on the Water (Special Measures) Bill (now the Water (Special Measures) Act 2025) that there will need to be a reduction in the demand for water, as it could outstrip supply within fifteen years. This is a thorny issue which cuts across all sectors. Water companies alone cannot reduce water demand. There needs to be a recognition on all sides that water is a finite resource and should be conserved. Assigning this mandate to water companies alone not only misunderstands the nature of water as a resource but also sets them up for failure.

The issues highlighted by these recent headlines can be addressed through increased connection and collaboration across different sectors. For example, for Lake Windermere, a wide range of industries and sectors would need to collaborate to both prevent pollution from entering Windermere and to manage land and water flows across the catchment. Farmers, local residents and highways authorities (amongst others) will all need to change their practices to enable “Only Rainwater” to enter into the Lake. Water companies do not have the mandate, the capacity or the ability to change these other actors. Nevertheless, water companies do have an opportunity to convene actors together to enable us to tackle water issues as a society rather than leave it to the water companies to address.

Water, water everywhere

Water should be organised by catchment – this is a frequent chorus within the water industry. In the main, this makes sense. The existing boundaries of the water companies don’t live by that maxim. However, if we are truly to consider water as part of the working of the entire economic system, then we need to be mindful that each of the other sectors have their own putative boundary-setting mechanism: health is organised by local councils in England and by health boards in Wales, while transport is a combination of national agencies with local councils, for example. Each sector operates to its own timelines which are vastly different from the others, and the collaboration between these sectors is made even more difficult by a lack of resources to enable that collaboration to take place. Thus, another boundary setting mechanism within the water industry, such as catchments, will only get us so far. Instead, we need to find better ways of working co-operatively rather than simply redefining boundaries of agency.

Our whole economy and our society depend on water. There is no sector which can operate without it. Thus, the issues we are seeing with water today, whether scarcity or flooding or lack of quality, are emblematic of the systemic issues we will be facing in the future.  If we can start to do it right here, we can prepare ourselves better for the future.

The Cunliff Review creates an excellent opportunity to take water out of the water industry and into the economy.  

To read further about our recommendations to the Cunliff Consultation, please see Stale to Fresh: Shifting how water companies work.