Innovation in the water sector

As we set out in our strategy, ‘Time to act, together’, the sector faces unprecedented pressures in the shape of climate change and population growth. At the same time they have big opportunities to change lives and improve our natural environment.

We consider that the adoption of innovative approaches is key to delivering long-term resilience and great customer service at an affordable price.

And the sector will need to step up to make sure it can continue to deliver reliable, resilient and safe water that is affordable for all.

We also want to see companies work more effectively together, and with their supply chain, to better tackle these challenges.

Our overall approach to innovation includes the following.

  • Our £200 million innovation competition fund to encourage innovation to transform water and wastewater services. We are delivering this using two types of innovation competition.
  • Our ‘innovation one-stop shop’, which we intend to establish, for providing water companies and innovators with access to non-binding regulatory advice on current rules and regulations, as they explore early stage innovation opportunities.
  • The mechanisms and incentives we included for companies in our decisions on the price, service and investment packages for the 17 largest companies for 2020-25 (the ‘2019 price review’). For example (among other things):
    • the process we used encouraged companies to put forward plans which are high-quality, ambitious and innovative; and
    • our outcomes and total expenditure approach facilitate innovation by giving companies the flexibility and freedom to adopt more efficient and effective means of delivery.
  • The business retail market, which aims to improve price and services for business and other non-residential customers.
  • The new appointments and variations market to improve local price and services for customers at sites across England and Wales.
  • Other existing markets and opportunities for new markets.

Our work is also complemented by the sector’s own ‘UK 2050 Water innovation strategy’. The strategy seeks to guide innovation investment across the sector, and will provide insight for us in rolling out the £200m innovation fund. It also signals new opportunities for partners and suppliers of all sizes to innovate and collaborate more easily and efficiently across the whole sector.

Developing further options for encouraging innovation

During May and June 2020, we consulted on outstanding policy issues, exploring options for the detailed design and implementation of the innovation funding and competition. This included a webinar on 10 June 2020 – watch on YouTube or read the webinar slides and questions and answers.



In August 2020 we published our final decisions on the innovation fund and how we would make it available through two types of competition. We also provided an update on complimentary activities, including our planned ‘one-stop-shop’ and on the UK 2050 Water innovation strategy.

We recognise that these are challenging times for all, and our priority is to support and challenge the water sector in ensuring all customers receive reliable water and waste water services. The current COVID-19 pandemic reinforces the important role innovation can play in addressing global challenges. With that in mind, we are aiming to launch the first round of the innovation competition in 2021, so as to start delivering the intended benefits for consumers and the sector as soon as possible.