Big changes are coming to the water sector in England and Wales. Amid rising public concern over pollution, infrastructure decay, and excessive shareholder payouts, the recently published Independent Water Commission report (the “Cunliffe Review”) sets out a bold and systemic reform package that could reset the direction of the entire sector.
At the heart of the review is a proposal to create a single, integrated regulator for the industry, supported by regionally-led system planning. This structural realignment promises to bring clarity, accountability, and strategic coherence to a fragmented regulatory landscape that has long struggled to balance economic, environmental, and consumer priorities.
Why a single regulator in water makes sense
The current system, split between Ofwat, the Environment Agency, the Drinking Water Inspectorate, and Natural England, has led to regulatory overlap, duplication, and a lack of clear accountability. By consolidating these functions under one roof, the new regulator would:
- Provide a “whole business” view of each water company, enabling smarter, more integrated supervision,
- Streamline regulatory processes, reducing inefficiencies and conflicting mandates,
- Shift from a transactional approach to a forward-looking, intelligence-led supervisory model, similar to the UK’s financial regulators.
Importantly, the new body would be equipped to take a systems-level view of the sector, not only regulating price and performance but also overseeing asset health, investment sustainability, and company viability. This shift is designed to restore public and investor confidence in a sector seen by many as having lost its way.
The role of regional system planners
Crucially, the central regulator would not act alone. Under the review’s proposals, 8 new Regional Water System Planning Authorities (plus one for Wales) would be established to take the lead on long-term infrastructure planning.
These bodies would develop regional water strategies that align with national policy but reflect local priorities. They would also coordinate investment across other sectors, such as housing, agriculture, and industry serving as a convening body for stakeholders across the water, environmental, and land-use space.
The division of labour is clear: while the regulator focuses on holding companies to account, the regional authorities take the strategic lead on shaping what needs to be delivered, by whom, and on what timescales.
Together, this dual structure aims to provide the best of both worlds: strong, independent regulation coupled with place-based planning that can account for regional environmental conditions and socioeconomic needs.
Why the report made headlines
- Topic of national interest. Water has dominated headlines: droughts, sewage pollution, soaring fines, and Thames Water’s financial crisis. With bills set to rise by up to 30%, scrutiny of water companies has intensified. The press has become more willing to hold service providers to account, especially where public trust has eroded.
- Emotive campaign group messaging. Many local charities, campaign groups and lobbying forums focused on river health, pollution, and regional issues, had been eagerly awaiting these findings. For them, this was a moment to push their causes into the national spotlight.
“A single, powerful regulator responsible for the entire water sector will stand firmly on the side of customers, investors and the environment and prevent the abuses of the past.”
Steve Reed, Environment Secretary
What the Cunliffe Review didn’t do
- It didn’t weigh in on public vs private ownership. The review deliberately sidestepped the ownership debate, despite public pressure and campaign group calls for renationalisation. Its focus remained on addressing how the sector is governed and regulated, rather than who owns it. This neutrality helped preserve political consensus, but disappointed those who see ownership as central to sector reform.
- It didn’t go as far as some had hoped on specific reforms. While the review was wide-ranging, certain expectations were left unmet. For example, it stopped short of recommending mandatory smart metering for non-household customers, which some argue is essential for improving water efficiency and demand management. Critics also noted a lack of firm measures on affordability, climate resilience, and household-level water use.
- It didn’t define the design of the new regulator. Although it recommended a powerful, single regulator to replace Ofwat and other bodies, the report left key design questions open such as the regulator’s structure, governance, independence, and funding model. These decisions have now been passed to the government, with further details expected in a White Paper.
Figure 1: The ‘As Is’ framework for water regulation in England and Wales
So what might the new regulator look like?
The report aims to combine Australian-style regional planning, Netherlands-style local accountability, and UK-style regulatory independence, while avoiding the pitfalls of US-style fragmentation.
What does this mean? That the Cunliffe Review’s proposed single regulator will likely be:
- Powerful – Akin to Ofcom and the PRA in terms of its scope and authority,
- Holistic – more than price-setting, it will include environment, governance, and asset resilience decisions,
- Integrated – in terms of size and ways of working, it will look like Australia’s regional system planners and the Netherlands’ catchment-led approach.
- Designed to rebuild trust – the body will match the political tone of the financial sector’s post-crisis overhaul and ‘look and feel’ like a completely new organisation.
For the moment it’s ‘business as usual’
The official lines from Ofwat have been nothing but supportive. It has also been clear that the government is not revisiting the PR24 price review funding decisions, nor the £600 million Innovation Fund process.
The UK government will publish a white paper in the autumn and bring forward proposed legislation to 2026. Ofwat will remain in place and continue to operate during the transition to the new regulator which may take up to 2 years to establish.
What happens next?
By Victoria Nevin
Victoria Nevin is Head of Product Implementation at Skewb. To speak with her about this topic in more detail, you can connect with her on LinkedIn.
