Sir Keir Starmer’s plan to turn the UK into a global AI powerhouse may come at a high cost for households. A new independent review, led by Sir Jon Cunliffe, has warned that water bills could rise by 30% over the next five years, partly due to the massive demand from AI data centres.
The warning comes as part of a scathing review of the UK’s water sector, which accuses regulators and successive governments of failing to prepare for future pressures. Sir Jon, a former deputy governor of the Bank of England, said the country must urgently reform its water governance or face soaring costs and environmental risks. His report calls for the abolition of the current water regulator, Ofwat, and a full overhaul of water regulation across England and Wales.
AI Data Centres Driving High Water Demand
AI data centres are energy-intensive, but many forget their massive water use. These facilities need water to cool servers and maintain stable temperatures, placing enormous strain on the UK’s aging water infrastructure. Sir Jon Cunliffe identified this as one of the key “pressures” driving up costs across the system.
He told BBC Radio 4 that population growth and AI development were both adding strain. “We want to have data centres in this country, they put huge demands on water,” he said. “But we must plan for them, decide the priorities, and manage the trade-offs.” His review recommends that infrastructure planners consider regional water stress before approving new tech developments.
Report Recommends Abolishing Ofwat and Other Regulators
The 88-point review calls for the complete removal of Ofwat and the Drinking Water Inspectorate, labelling the system “fragmented and overlapping.” It proposes a single, more accountable water regulator for both England and Wales. The report also advises stripping the Environment Agency and Natural England of their regulatory roles, citing their failure to prevent illegal sewage dumping.
Sir Jon did not shy away from blaming past governments for neglect. Speaking on Times Radio, he said: “It’s the failure of the government to balance out all the different pressures on water.” He stressed the need for long-term investment and strategic planning to avoid chaotic, reactive spending.
Government Signals Action But Avoids Full Commitment
Water Minister Emma Hardy acknowledged the system’s failure, calling it “broken.” However, she refused to commit to all 88 recommendations, instead promising a full white paper and a new water bill next year. She added that it’s “quite outrageous” that water bills have already risen 26% in recent years, largely due to collapsing infrastructure and delayed investment.
Steve Reed, the Environment Secretary, will deliver a speech later today vowing to end past failures and promising deep reform. While the government appears open to change, many worry that partial implementation will not be enough to address the rising costs and environmental fallout.
Political Tensions and Industry Response
The review has intensified political debate. Over the weekend, Reform UK leader Nigel Farage clashed with Steve Reed over water policy. Farage called for partial nationalisation of water companies, although he failed to explain how it would be funded. Reed dismissed the idea, saying Farage “hasn’t got a clue.”
Water UK, which represents water companies, welcomed the report, calling it a “major moment.” A spokesperson said the recommendations could help “secure water supplies, support economic growth and end sewage entering our rivers and seas.” However, they also cautioned that the industry will need time to digest the proposed changes.
Time to Prioritize Long-Term Water Security
While the UK government embraces AI and development driven by technology, it also needs to think about how to strike a balance between innovation and its impacts on the demand for infrastructure. This is highlighted in Sir Jon Cunliffe’s report, which serves as a reminder to policymaker, water companies and the public. Policymakers and water companies cannot ignore the water demand needed to run AI data centres or it will result in basic utilities being out of reach for many.
In the absence of any meaningful reform, if water bills are massively increased, the erosion of public trust in regulators and the government will be further diminished. Given that environmental issues and population pressure seem to be escalating, sustainable water policy cannot be merely an option, it is urgent.
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