The Prime Minister confirmed on 29 September that a strengthened Water Bill will remove the long-standing limit on how much of a major water and sewerage company the government can own in England. The restriction, dating back to the Water Act 1989, currently caps state ownership at a level below 3% for each company, varying slightly by firm. Scrapping it hands ministers a tool that does not exist for any other regulated sector in the country.
Why the cap existed and why it is going
The 1989 limit was written into law at the point of privatisation, designed to keep water companies firmly in private hands and prevent renationalisation by stealth through share accumulation. Three decades on, the government argues that the restriction has become an obstacle to intervention rather than a safeguard. Ministers say public trust in the sector has been strained by pollution incidents, rising bills and weak accountability, and that the state needs the option to act directly through share ownership if companies fail customers or the environment.
Removing the cap does not mean nationalisation. The government has been explicit that private capital remains central to funding the infrastructure upgrades the sector needs, from sewer networks to treatment works. What changes is optionality: ministers could, in principle, acquire a larger stake in a struggling company, something currently barred by statute regardless of circumstance.
What this means in practice
The announcement itself does not transfer any shares or change ownership today. It removes a legal ceiling, giving the government room to consider a broader set of interventions later, including different ownership structures, if a company's performance or financial position demands it. Any such step would still need to sit within existing fiscal rules, which the Chancellor and Prime Minister have said will be respected at the Budget, including a buffer for economic uncertainty.
- The current ownership limits, varying between roughly 1% and 3% depending on the company, will be removed from the Water Act 1989.
- The change applies specifically to water and sewerage companies in England.
- Private investment remains the government's stated foundation for financing the sector's long-term needs.
- Mayors and strategic authorities are expected to gain new powers to hold water companies to account locally.
Accountability, local power and what comes next
A second strand of the reform addresses local governance. The Prime Minister acknowledged that mayors and strategic authorities currently have limited influence over the priorities of water companies operating in their areas, and little practical means of holding them accountable. New powers for local leaders are being developed alongside the wider water sector reforms, though the detail of how these would work has not yet been published.
The fuller picture is expected later this year, when the government publishes its 10-year plan for Britain. That document is intended to set out how stronger public control over essential services, including water, will be applied, and will form the basis for the legislative changes carried through the strengthened Water Bill. Until then, the removal of the ownership cap should be read as a structural change to the government's available options, not a signal of imminent ownership changes at any specific company.