AMP8 and the Future of Water (Part One): 5 ways that the water industry is falling short 

As of April 2025, AMP8 is upon us, and already it feels as though a defining moment for the UK water sector is slipping by.  

The most ambitious Asset Management Period on record demands a £104 billion investment, and there is significant risk that the water sector may fail to rise to the challenge. It’s not difficult to understand why the pressure might be overwhelming; tighter Ofwat regulations, growing public scrutiny and the intensifying climate crisis loom like proverbial elephants in the room.  

Outdated legacy systems and digital underinvestment; reluctancy to embrace transformation with be costly. This means penalties, reputational damage and unsustainable costs, collapsing infrastructure and reduced resilience, and will result in companies being left behind in a world where nature-based solutions, customer trust and digital transformation are king.  

But all is not lost. 

This mini-series of blogs will explore:

1. 5 ways the water industry is falling short on AMP8 delivery (this blog)
2. What Water Companies Must Do Now to Recover AMP8 Ground
3. What Does AMP8 Success Look Like? Futureproofing the UK Water Industry

Success is possible, and we’ll get to that. But for now, let’s take a look at the five ways in which UK water infrastructure is falling short, just two months into AMP8:

1. Failure to Adequately Prepare During AMP7

The opportunity to lay groundwork for AMP8 came during AMP7, yet many water companies missed that critical window. The previous Asset Management Period was marred by insufficient investment in digital infrastructure and a reluctance to adopt innovative practices and modernise operational processes. This lack of foresight has left companies ill-equipped to meet the expectations of AMP8, where (amongst other things) digital technology and predictive data need to drive decision-making.

Simply, the flexibility and leniency afforded to water companies through AMP7 is no more. See the below table for key differences:

This lack of readiness was compounded by inconsistent regulatory alignment. The National Audit Office has criticised a failure among regulators to deliver a unified strategy for modernising ageing water infrastructure. The result has been sector-wide confusion, leaving water companies without the strategic direction needed to prepare for AMP8’s tighter operational and environmental and demands. Speaking of which…

2. Lagging on Pollution Reduction Targets

Despite a commitment to reduce pollution incidents by 30% between 2020 and 2025, UK water companies have achieved only a 2% reduction to date. Nine out of eleven companies reported an increase in pollution incidents in 2023. This underperformance has led to£157.6 million in Ofwat financial penalties; a red flag to the increased environmental obligations outlined in AMP8, including:

• Significantly reduced storm overflow discharges: with some expectations to cut storm overflow volumes by as much as 50% by 2030.
• A target of zero serious pollution incidents
• Improved river and bathing water quality (aligning with broader UK Environment act goals)
• Transparent reporting and real-time data on pollution and discharge

In total, £11 billion of AMP8’s £104 billion investment package has been designated specifically for sewage infrastructure upgrades and pollution reduction efforts, including:

• Upgrading over 800 storm overflows
• Installing monitoring systems at 100% of overflows
• Expanding capacity at treatment works
• Rolling out nature-based solutions to reduce surface water runoff

At the same time, leakage remains an unresolved challenge. Water companies pledged to cut leakage by 16% by 2025, but Ofwat reported an average annual reduction of just 6%. 

3. Inadequate Investment in Digital Infrastructure

A significant portion of the industry lacks the digital tools necessary for effective infrastructure management. Over 41% of water industry leaders report that operational inefficiencies are directly tied to outdated or insufficient digital capabilities. With performance outcomes tightly linked to regulatory incentives and penalties, this lack of digital readiness will be costly for the industry.

According to Ofwat’s PR24 final methodology, water companies are expected to deliver measurable improvements in operational efficiency, environmental outcomes and customer trust, the success of which will be impossible without digital transformation.

AMP8 requirements mean water companies will need to:

• Implement open data platforms
• Enable predictive analytics (for proactive asset maintenance and pollution prevention)
• Utilise high-accuracy geospatial data
• Demonstrate evidence of innovation (with measurable improvements tied to performance commitments and outcome delivery incentives (ODIs).

Many organisations also lack the in-house expertise to deliver digital transformation at scale. With the water sector facing a severe skills shortage (particularly in geospatial data, digital engineering, and asset management) companies risk falling further behind.

4. Escalating Customer Complaints and Dissatisfaction

Customer trust is eroding. In the 2023–24 period, unresolved customer complaints surged by 29%, marking the highest level of dissatisfaction in nearly a decade. Billing issues and environmental concerns (particularly sewage spills) are at the forefront of customer grievances. High-profile providers such as Thames Water act as a cautionary tale when it comes to public-perception and negative media coverage.

Considering that AMP8 places a stronger regulatory emphasis on customer service, transparency and trust, any perceived mismanagement will be under scrutiny. Under Ofwat’s PR24 final methodology, water companies must:

• Deliver measurable improvements in customer satisfaction through outcome delivery incentives (ODIs)
• Enhance the quality and speed of complaint resolution
• Ensure equitable service delivery
• Demonstrate improved customer trust scores (with mentalities or rewards tied to performance against Customer Measure of Experience (C-MeX) and Developer Measure of Experiences (D-MeX) benchmarks.

With customer bills set to see an increase of 36% over the next five years (equating to an additional £157 annually by 2030, starting with an £86 rise in 2025) water companies will need to work hard for customer support throughout AMP8.

5. Financial Instability and Mismanagement

Financial missteps are also undermining public confidence. Across the industry, decades of underinvestment, muddied dividend structures and short-term financial decision-making have left many companies feeling far from resilient.

This financial fragility is alarming, given AMP8’s regulatory focus on:

• Long-term investment planning
• Affordability and value for money (Ofwat has explicitly stated that future investment must not come at an unaffordable cost to bill payers)
• Stronger governance and financial resilience (Through the Board Leadership, Transparency and Governance (BLTG) principles, Ofwat is demanding greater scrutiny of executive pay, dividend policies and corporate transparency.
• Efficient delivery of the AMP8 programme as a whole

Time to Act:

All is not lost. There’s still time for course correction and confidence rebuilding, and though the challenges are significant, change is possible.
The water industry operates constantly under intense and conflicting pressures: legacy infrastructure, tightening budgets, heightened public scrutiny, and accelerating regulatory demands. And so falling short is not demonstrative of a lack of willing, but a reflection of the complex times we live in, and the systemic hurdles inherent.

With the right strategies, AMP8 can be a turning point, and the opportunity to make waves in the water industry is ripe for the taking; digital transformation, customer nurturing, long-term planning, regulatory alignment…

In our next blog, we’ll explore what those strategies could look like, and the actions UK water companies must take now.

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