A change in course for the water industry – insights from the Independent Water Commission’s final report

On 21 July 2025, the Independent Water Commission (the “Commission”) published its final report (the “Report”), concluding the most comprehensive review of the water sector since privatisation in the 1980s. The review aimed to develop recommendations for a fundamental reset of the sector, with the objectives of restoring public trust, improving regulatory oversight, attracting the investment necessary to improve the waterways of England and Wales, and establishing a framework capable of meeting future water demands. Following a Call for Evidence and extensive engagement with a wide range of stakeholders, the Report sets out the Commission’s final conclusions and recommendations.

This Law-Now provides a high-level overview of the Commission’s report, highlighting its key recommendations and offering insight into potential future developments, along with our initial comments on the Report. Should you wish to discuss any aspect of this Law-Now or have any specific questions, please do get in touch. 

The Recommendations

The Report sets out 88 recommendations to the UK and Welsh governments and regulators, identifying areas where ambitious change is needed to drive a fundamental reset of the water sector.

The key recommendations include the following areas, which have been under recent scrutiny:

• Single Integrated Water Regulators – In England, the Report proposes merging Ofwat, the Drinking Water Inspectorate, and the water environment functions of the Environment Agency and Natural England into a new, single integrated water regulator. It states that this will deliver greater accountability, with “one organisation and one board responsible and accountable for the outcomes of the sector”. In Wales, Ofwat’s economic regulatory responsibilities would be integrated into Natural Resources Wales.
   
• Establishing Regional Water System Planning Authorities – The Report recommends establishing eight new regional water system planning authorities in England and one national authority in Wales that will more effectively integrate planning across the whole water system. These authorities would assume devolved planning responsibilities and resources to develop water investment plans that reflect local priorities.
   
• Greater Consumer Protections – The Commission recommends converting the Consumer Council for Water (CCW) into a new, mandatory Water Ombudsman, thereby aligning the water industry with other regulated sectors. Consequently, the Commission recognises that the CCW’s advocacy responsibilities should be transferred to another body, and it recommends that Citizens Advice assume this role.
   
• Stronger Environmental Regulation – The Report calls for enhanced regulation in areas such as sludge management, drinking water standards, water resources, and abstraction. It also recommends significant reforms to Operator Self-Monitoring, including greater digitisation, automation, public transparency, third-party assurance, and intelligence-led inspections. Further, following one of the driest springs on record, the Report recommends reducing household water consumption by introducing compulsory smart water metering, incentivising water efficiency through changes to wholesale tariffs for industrial users and introducing greater water reuse and rainwater harvesting schemes in both household and non-household markets.
   
• Increased Oversight of Water Companies – The Report recommends new regulatory powers to block material changes in control of water companies. It also proposes new “public benefit” clauses in water company appointment licences; for example, in England, companies would be required to conduct their business “to deliver long-term value to customers, communities and the environment”. Additionally, it recommends the regulator set minimum capital levels for water companies to reduce their reliance on debt and attract investment.
   
• Public Health Reforms – The Report recommends legislative reforms to better manage the public health aspects of water, including incorporating public health objectives in water quality legislation, consulting on reforms to the Water Framework Regulations and ensuring senior public health representation on regional water planning authorities. Given the increasing body of evidence regarding the effects of emerging pollutants, the report also recommends implementing legislative changes to address substances such as PFAS, microplastics, and micropollutants, which are becoming increasingly prevalent across the water system.
   
• Fundamental Reset of Economic Regulation – The Commission recommends that the regulator adopt a “supervisory, more company-specific approach” to regulating individual companies, representing a fundamental shift in regulatory strategy.
   
• National Water Strategy – The Report calls for increased efforts to prepare for a drier future. It believes that the UK and Welsh governments should publish a new, long-term, cross-sectoral, and systems-focused 25-year national water strategy. This recommendation appears to support the shift towards a more holistic approach to water regulation. Such a shift is already evident in the Environment Agency’s change in approach for granting abstraction licences, where the focus has moved away from individual applicants and towards a holistic, ecosystem-wide approach that considers the needs of the entire country. Additional insights on this subject can also be found in our previous Law-Now on the biodiversity measures impacting farmers and agriculture in the UK and Ireland, which you can read here. The Report also recommends revising the current Strategic Policy Statement and replacing it with a new Ministerial Statement of Water Industry Priorities. Both of which should be published every five years.
   
• Infrastructure and Asset Health Reforms – The Report proposes changes to the management, monitoring, and delivery of water infrastructure to better safeguard water provision and wastewater management for future generations. This includes new requirements for companies to map and assess the health and resilience of their assets, such as their pipes, treatment works, and pumping stations.

Looking Ahead

On the day the Report was published, Environment Secretary Steve Reed addressed parliament and accepted five of the Report’s recommendations, including confirming that Ofwat will be abolished and replaced by a single regulator. 

Reed also announced that a white paper containing the government’s full response to the Report will be published and consulted on in Autumn 2025, which will help inform a new Water Reform Bill that is stated to be implemented “during the lifetime of this Parliament”.

References: The Independent Water Commission’s Final Report, published on 21 July 2025; Environment Secretary Steve Reed: Response to the Independent Water Commission’s final report, published on 21 July 2025, Biodiversity Measures Impacting Farming and Agriculture in the UK and Ireland, published on 25 June 2025.

Co-authored by Eleanor Addinall, Trainee Solicitor at CMS.