Water scarcity could cost £8.5bn in lost commercial opportunity

Water scarcity could cost the economy £8.5bn in lost commercial growth over the next five years, which is 3.5% of total Office of Budget Responsibility forecast growth for the UK economy in this time period.

That’s according to new research by Public First for Water UK. The figure comprised: 

• £6.4bn lost in business and industrial growth in areas where supply is constrained, to make way for the 1.3m homes it is thought possible to build (shy of the Government’s 1.5m target).

• £1.3bn to make way for the AI growth agenda (albeit the productivity gains AI growth will enable could be as high as £400bn)

• £800m, which the researchers found water scarcity would curtail from growth projections in the OxCam Arc (which is £78bn by 2035, so a cut of around 10%). 

The cost of water scarcity highlighted that the £8.5bn total loss would equate to a reduction of £2.5bn in tax receipts, and over 25% of the £9.9bn in fiscal headroom announced at Autumn Budget 2024.

Public First said: “Without swift and rapid policy intervention ahead of 2029 and of the next round of water resource management planning, water scarcity will become the main blocker to commercial development and subsequently, economic growth. Fortunately, there is still time to make these interventions if policymakers act quickly.”