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Ownership of the water sector

The water industry in England and Wales is in private ownership, following privatisation in 1989. However, following examples of poor environmental performance and high levels of accrued debt, many campaigners have called for the industry to be brought back into public ownership.

This briefing sets out more information about privatisation and the current structure and regulation of the water industry, and cost estimates of public ownership.

Ownership of the water industry has been the subject of significant Parliamentary debate in recent years, and a series of reforms have been proposed by the Labour Government.

Privatisation of the water industry

In England and Wales, the water industry was privatised in 1989, and since then water supply has been delivered by private water companies. These include both private and publicly limited companies in England, and companies which are in private ownership but have no shareholders in Wales. Before this, water and sewerage provision was largely the responsibility of regional water authorities and local government.

The Water Act 1989 provided for the sale of the regional water authorities to newly created water and sewerage companies. These companies paid £7.6 billion for the regional water authorities, while the government took on the sector’s £4.9 billion debt and also granted the water companies £1.5 billion in public funds. The 1989 act also created three new regulators: the Drinking Water Inspectorate (responsible for monitoring drinking water quality), the National Rivers Authority (responsible for environmental regulation, now replaced by the Environment Agency and Natural Resources Wales) and the Water Services Regulation Authority (otherwise known as Ofwat and responsible for economic regulation).

The legislation governing the water sector was subsequently consolidated into two main acts:

• the Water Industry Act 1991 sets out the main powers and duties of the water and sewerage companies, replacing those set out in the 1989 act. It is focused on water and sewerage companies, their regulation, duties, powers, customers, and how companies can charge customers for water.
• the Water Resources Act 1991 is focused on environmental and water resource functions of the Environment Agency and Natural Resources Wales (at the time the National Rivers Authority) and the Drinking Water Inspectorate, including water quality, pollution control and abstraction licensing.

The legislative framework has been subsequently modified by further acts, including specific legislation relating to environment, competition, flooding and executive pay. For more information about this, see Ofwat’s webpage on Legislation. For more information about privatisation, see the Library briefings on Economic regulation of the water industry and Privatisation.

Current regulatory approach

All water companies hold an appointment as a water undertaker (or sewerage undertaker as relevant), which is subject to conditions with which the companies must comply. This is also referred to as a licence.

In England and Wales, Ofwat (the Water Services Regulation Authority) holds copies of each undertaker’s original licence and tracks any amendments. As the economic regulator, Ofwat is responsible for enforcing the licence conditions.

The water industry is highly regulated. In addition to licence conditions, water companies must comply with economic, environmental and water quality regulations, enforced by Ofwat, the Environment Agency or Natural Resources Wales, and the Drinking Water Inspectorate respectively. Under current water reforms, the government plans to consolidate regulation into a ‘super regulator’, see below.

While all three regulators require water companies to meet certain requirements, the most complex approach to regulation is through Ofwat’s price review and price control process. Every five years, water companies submit business plans to Ofwat for the price review, and Ofwat assesses these and sets controls on what each company may charge its customers in return for the services it provides. The most recent was price review 2024 (PR24). These price controls are then in place for the five-year price control period, with PR24 decisions in place from 1 April 2025 to 31 December 2030.  

For more information about the current regulatory approach, see section 2 of the Library briefing on Economic regulation of the water industry.

Water reforms

The government has set out an extensive programme of planned water reforms, including policy and legislation.

There has been substantive parliamentary discussion about the ownership of the water sector in England, dating back to pre-privatisation. More recently, the Sunak Conservative Government repeatedly said that it supported the existing privatised model and that it was “committed to the system of independent economic regulation” with “no plans to bring water into public ownership”.

Following the general election in July 2024, the government announced initial steps to “clean up the water industry”. These steps included immediate measures, such as ringfencing investment in water infrastructure, and plans for longer-term measures, such as introducing new legislation and launching a wider independent review of water sector regulation. The Starmer Labour Government introduced the Water (Special Measures) Act 2025, launched an Independent Commission into the water sector, and set out wider plans for reform. The government repeatedly said that it had “no plans to nationalise Thames Water or any other water company”.

Water (Special Measures) Act 2025

The Water (Special Measures) Act 2025 came into force in February 2025, and introduced measures to:

• strengthen regulation of the water industry
• enable the water industry’s economic regulator, Ofwat, to ban the payment of bonuses to water company executives if environmental standards are not met
• increase accountability for water company executives

For more information, see the Commons Library briefing Water (Special Measures) Bill 2024-2025.

Independent Commission and plans to reform the water system

In October 2024, the UK and Welsh Governments launched a joint Independent Commission into the water sector and its regulation. It was chaired by the former Governor of the Bank of England, Jon Cunliffe, and was “expected to form the largest review of the industry since privatisation”.

Published in July 2025, the final report of the Independent Commission, known as the Cunliffe review, made 88 recommendations and concluded that a ‘fundamental reset” of the water sector was needed. It recommended:

• abolishing Ofwat
• creating a new single water industry regulator for England
• devolving and integrating water industry regulation into the environmental regulator in Wales

In tandem with the publication of the Independent Commission’s report, the then Environment Secretary, Steve Reed, made a statement in the House of Commons confirming the government’s plans to create a new single regulator for the water sector in England, as well as wider regulatory reforms.

White paper and next steps

In January 2026, the government published its water white paper, A new vision for water, which set out its response to the Cunliffe review and its plan to “overhaul the water system”. In a statement in the House of Commons, the then Environment Secretary, Emma Reynolds, highlighted plans for a new single regulator and wider policy reforms, and said the white paper would be followed by a 2026 Transition Plan and a ‘water reform’ bill “during this Parliament”.

Clean Water Bill

In the May 2026 King's Speech, the government announced its forthcoming Clean Water Bill which it said would "strengthen confidence in the water sector – restoring the public’s trust, giving investors the stability to back long-term upgrades, and providing the clarity needed to support economic growth".  More information on the bill is provided in the background briefing notes published alongside the King's Speech.

Burnham Government

The Burnham Labour Government has not yet made any public statements on ownership of the water sector.

However, in Andy Burnham’s campaign for election as an MP of Makerfield, he reportedly said that “I don’t think you nationalise the whole thing necessarily straight off, because that’s complicated and probably expensive, but you look at the different situations in different parts of the country” and that for Thames Water, “there’s a very strong case for public ownership to sort out its problems”.

A report from Mainstream (a soft left political network affiliated with the Labour Party), The Productive State: A Framework for Manchesterism, sets out that “water networks […] require a national public corporation because their value is inseparable from national-scale coordination and their investment horizon exceeds what any municipal or co-operative balance sheet can support”.

In his first speech in the Commons as Prime Minister, Andy Burnham criticised centralisation of political power and economic privatisation, calling the water industry a “leaking monument” to the governing approach of “a country run in the private rather than the public interest”. He said that the government would publish a “10 year plan for Britain” later in the year to “set out plans for stronger public control over these essentials, making them work for people and places again”. He did not directly reference nationalisation.

In response to a question asked by Alison Griffiths MP (Conservative), Burnham told the Commons that “It is very regrettable that the privatisation of water has left us in a position that we will find it very difficult to reverse.”

How might a transfer to public ownership happen?

While neither the 1989 nor the 1991 act (see section 1.1 on privatisation) prohibit nationalisation or public ownership of the water sector, this would likely require new primary legislation. The Institute for Government's overview, ‘What are the legal aspects of nationalisation?’ published on 23 April 2025 provides a useful explanation of the legal mechanisms used for large scale nationalisations. 

To date, no water companies have been transferred out of private ownership.

Special administration

The water industry special administration regime (WISAR, also known as SAR) is an administrative vehicle that allows water companies to be placed into in the case of either insolvency or poor performance. A special administration is a process in which the objectives of the administrators are modified (compared to a normal administration) to include public interest objectives. SARs are in place for multiple public sectors (including energy and rail) where it is important that the public service will continue to be provided pending rescue or transfer to new owners.

The WISAR process is set out in the Water Industry Act 1991 (Part II, Chapter II) and can only be used when a water company is either unable to finance its functions (becomes insolvent, an 'insolvency SAR') or fails to meet its legal obligations (and does not or cannot take remedial action) to such an extent that it is inappropriate for the company to hold its appointment or licence (a ‘performance SAR’). Either the Secretary of State for Environment or Ofwat must apply to the High Court for a special administration order, and if this is granted, appoint a special administrator. A performance SAR may apply to failing to carry out environmental statutory functions or licence conditions.

To note, the WISAR is not legally equivalent to nationalisation. Its statutory purpose is to maintain essential services where a company is insolvent or has failed to meet its obligations. Administrations are temporary measures, and any administrators look for a viable route out of administration. While the government may provide financial support, it would not necessarily be the administrator, nor would it automatically become the owner of a water company placed under the WISAR.

Takeover and payment of compensation

The most likely legal mechanism for nationalisation of a water company is through a government takeover and subsequent compensatory payment to shareholders. This is the mechanism that has been deployed in wider nationalisations, such as British Steel (see below). When discussing the Steel Industry (Nationalisation) Act 2026, law firm Browne Jacobson said that full nationalisation of industry would require primary legislation covering compensation, governance and “TUPE equivalent” protection of employees and pensions.

There is no one format for takeover and compensatory legislation, although the Banking Act 2009 set out powers for the Treasury and the Bank of England to intervene in failing financial institutions. Some form of compensation is required under the European Convention on Human Rights, as implemented by the Human Rights Act 1998, for deprivation of property, but this does not have to reflect full open-market value. However, if the compensatory or market value is nil (such as where a company is insolvent), shareholders might not need to be compensated.

How much might public ownership cost?

There is no definitive assessment of how much public ownership of the water sector could cost.

Box 1 includes information on the recent government takeover of British Steel, which may be of interest as a comparative example of public ownership.

In terms of specific costs for the water industry, Defra has published a policy paper setting out that the cost could be around £100 billion to nationalise the sector, but as this is based on 2025 regulatory capital values it may now be an underestimate. Additionally, different stakeholders have posed different estimates of the potential costs, with some arguing that there would be no cost for takeover and instead any compensation (as determined by Parliament) would be where the main costs stem from.

Defra estimate - £100 billion (2025)

Defra published its policy paper, ‘Nationalising the water sector: how we assessed the cost’ on 16 September 2025. This estimated that the cost to renationalise the water industry would be around £100 billion. The paper sets out that the department based its estimate on the regulatory capital value (RCV) of the water industry as a whole because it is the “closest proxy for the total value of the sector’s debt and equity”.

RCV was developed for regulatory purposes and is primarily used to set price limits for how much water companies can charge their customers, as it provides information on the return on capital invested in the business. However, RCV is now also widely used by the investment community as a proxy for the market value of regulated businesses beyond the water sector.

The RCV for individual water companies and for the water industry as a whole are published by Ofwat, the current economic regulator of the water industry in England and Wales. Ofwat publishes its estimates of RCV annually and its estimate for the 2025 RCV for the water industry as a whole, as quoted by Defra, is just under £107 billion. Its estimate for the 2026 RCV for the water industry as a whole is just over £117 billion.

Frontier Economics - £144 billion by 2030 (2026)

The consultancy Frontier Economics published analysis ‘Estimating the Cost to the UK Government of Nationalising the English Water Companies’ on 29 July 2026, projecting a total cost of £144 billion in 2030 using the same RCV-based methodology as Defra. The estimate is higher than Defra’s as the sector’s regulated asset base is expected to expand during the 2025 to 2030 price control period, reflecting additional capital investment that increases the water sector’s assets.

This estimate was commissioned by Thames Water’s creditor group.

Office for Budget Responsibility - £78 billion (2025)

The Office for Budget Responsibility (OBR) has not produced a specific estimate of the cost of bringing the water industry into public ownership. However, in its ‘Fiscal risks and sustainability report’, published on 8 July 2025, it assessed ‘reclassification risk’ for ‘near public sector’ bodies which are currently part of the private sector but provide essential services (such as the water sector). The OBR said these near public sector bodies “pose a risk to PSNFL [public sector net financial liabilities] because they have significant net financial liabilities (which are captured in PSNFL) backed by significant non-financial assets (which are not captured in PSNFL)”.

For the water sector, the OBR set out that water companies had £91 billion in debt and other financial liabilities, £12 billion in financial assets, and £94 billion in non-financial assets in 2023 to 2024. It therefore calculated that, based on these figures, “were the water companies to come on to the public sector balance sheet, PSNFL could increase by around £78 billion (2.8 per cent of GDP)”. The OBR did not apply RCV.

The OBR’s most recent Fiscal risks and sustainability report was published in July 2026, but does not discuss the cost of bringing the water industry into public ownership.

CommonWealth - £0 (2025)

Public ownership campaigning think tank CommonWealth published an article ‘How to Clean Up Our Water: Why Public Ownership in Law Costs Zero’ on 5 June 2025. Disputing the Defra estimate, it states that “The true and fair value in law to bring failed water companies into public ownership is closer to zero” and asserts that a cost based on RCV is “entirely a construct of the regulator” and “not based in law”. It argues that RCV is not representative of true value as it does not consider debt in the same way as a public takeover bid would, referencing the example that a private equity firm bid £4 billion to take over Thames Water, compared to an RCV of £19.6 billion.  It argues that the government should place water companies in special administration and pay their creditors only an “appropriate value”, which CommonWealth argues should be £0 given past performance.

Moody’s - £14.5 billion (2019)

In 2019, the credit rating agency Moody’s calculated the book value of shareholder equity in the English water companies for the Financial Times as £14.5 billion. This is not a current valuation, and it is worth noting that book equity can vary substantially from both market value and RCV-based estimates.

Responding to Moody’s valuation in the Financial Times’ coverage, water companies said that basing compensation on book value would penalise shareholders. Additionally, the cross party think tank, the Social Market Foundation (see below), objected to the use of book value, warning that the “the potential for the government to acquire assets at substantially below their intrinsic value could curtail inward investment into the UK”.

Social Market Foundation - £90 billion (2018)

The Social Market Foundation (SMF) published a report, ‘The cost of nationalising the water industry in England’, in 2018. This estimated that the cost of obtaining control over regulated water businesses would give a “takeover value of £90 billion”, which would have at the time entailed a 5% increase in government debt levels. The methodology for this report is based on RCV (as it stood in 2018) multiplied by 1.3, which the SMF states was widely used in the sector at the time to represent the takeover value of water companies.

This report was commissioned by several water companies, but SMF maintains that it was produced independently and that it retained “full editorial independence, using publicly available information and sources” and that “any views expressed in the report do not necessarily reflect those of the commissioning bodies”. However, 2019 analysis in the Financial Times argued that taking into account of the debt of water companies was an inaccurate estimate of the buy out costs, as the government would only need to buy out equity. Economist Professor Dieter Helm told the Financial Times that the SMF report had “virtually no intellectual substance and the [£90 billion] figure was wrong”.

University of Greenwich - £20 billion (2017)

The Public Services International Research Unit (PSIRU) at the University of Greenwich published a report, ‘Bringing water into public ownership: costs and benefits’, in 2017. This estimates that shareholder compensation from a takeover could be as high as £20 billion, but notes that Parliament could set the compensation lower than this. It does not set out any other costs, and estimates that public ownership would save £2.3 billion a year through eliminating the payment of dividends to shareholders.

Further reading

Parliamentary publications:

• Commons Library, Economic regulation of the water industry
• Commons Library, Water reform: "A new vision for water"
• Commons Library, Future water resources
• Environment, Food and Rural Affairs Committee, Priorities for water sector reform, 16 June 2025

Cost estimates of nationalisation:

• Defra, Nationalising the water sector: how we assessed the cost, 16 September 2025
• Frontier Economics, Estimating the Cost to the UK Government of Nationalising the English Water Companies, 29 July 2026
• Office for Budget Responsibility, Fiscal risks and sustainability – July 2025, 8 July 2025
• CommonWealth, How to Clean Up Our Water: Why Public Ownership in Law Costs Zero, 5 June 2025
• Financial Times, Water renationalisation to cost as little as £14.5bn, 26 April 2019
• Social Market Foundation, The cost of nationalising the water industry in England (PDF), February 2018
• University of Greenwich, Greenwich Academic Literature Archive - Bringing water into public ownership: costs and benefits, 1 June 2017