Labour’s privatisation failure is turbo-charging an AI data centre water crisis

This article is part of a series looking at the risks to the UK’s water security, which are being amplified by our current Labour government. You can read the AI data centres Water Crisis series here.

At this point, most people understand that privatisation has been an unmitigated disaster. Unfortunately, our current government are part of the minority who think otherwise.

To make matters worse, rather than taking control of our vital national resources, Keir Starmer has instead seen fit to legalise an unprecedented new drain on energy and water. As a recent report from a government advisory group notes:

The UK already faces a projected daily water deficit of nearly 5 billion litres by 2050, a challenge exacerbated by climate change and population growth. A critical policy gap exists as current national water resource plans, including those finalised in 2025 by water companies, do not adequately account for the burgeoning demand from infrastructure such as AI data centres

Starmer’s national betrayal via AI data centres

As We Own It detail, privatisation has created multiple problems, with issues relevant to this topic including:

• Waste: Money which should go to improving services instead goes to shareholders.
• Cutting Corners: When private companies are forced to maintain or (heaven forbid) improve services, they inevitably spend as little as possible.
• Cherry Picking: Companies focus on the areas which make them money to the detriment of everything else.
• Inadequate Regulation: The revolving door between regulators and private industry neuters effective regulation.
• Loss of Capacity: When the government outsources, it loses the expertise it needs to understand how we should run these systems.

🤑 ‘£200bn of our money has been paid out to shareholders for privatised utilities’

😠Privatisation is draining vital public services. We’re paying more and more for services which are crumbling.

⏰Time is up on the failed experiment of privatisation. Public ownership NOW. https://t.co/DeoTNU96ZF

— We Own It (@We_OwnIt) October 17, 2025

In 2020, Keir Starmer pledged to nationalise public services – a move which would have aligned him with public opinion:

Since coming to power, Labour have argued we can’t re-nationalise water because it would cost ‘tens of billions of pounds‘. So we should just ignore the tens of billions that privatisation has already cost, I guess? Or the tens of billions it will continue to cost in future?

All for a system which gets worse year on year.

In response to Starmer’s U-turn, some have said it wouldn’t cost us anywhere near this ‘tens of billions’ figure; others have argued the water companies’ constant failures mean we shouldn’t have to pay them anything.

How much?

Reporting on a Common Wealth report in June this year, James Wright wrote for the Canary:

Keir Starmer and the government can bring the water companies into ‘special administration’ for their failings. Sky high debt, eye watering dividends and sewage dumping from the companies means the government can use such a process. Special administration is designed to protect vital public services that are too big to fail in order to maintain the service when the provider is failing.

1989 Thatcher privatised English water/sewage
Sold off with no outstanding debt buyers ‘given’ £1.5bn sweetener
32 years later privateers have loaded utilities with £53bn debt
Cut investment by 15%
Paid out £72bn in shareholder dividends @We_OwnIt Public Ownership Now pic.twitter.com/GW59xFMy0J

— Ian Leggat (@HawkhillLaddie) December 29, 2021

These companies aren’t just losing money; they’re also losing water:

Water firms across the country are announcing hosepipe bans.

All while:
– 3 billion litres of water are wasted daily through leaks.
– Not a single major reservoir has been built since privatisation.

Time for public ownership: https://t.co/wclY6xs74x pic.twitter.com/BNlFjmfLr3

— Clive Lewis MP (@labourlewis) July 15, 2025

Notably, we’re on track for a water deficit of 5 billion litres a day by 2050. This figure does not “adequately account” for AI infrastructure or data centres, because the owners aren’t compelled to report on water usage.

While Starmer no longer wants to cure the cause of the problem, he has promised to treat the symptoms. How does he intend to do that? By replacing our failed regulator with…

…a different regulator.

This is the biggest overhaul of the water sector in a generation.

My government will abolish Ofwat and establish a single powerful regulator to prevent water pollution and protect families from bill hikes.

Ending the chaos of the past.

Delivering for working people.

— Keir Starmer (@Keir_Starmer) July 21, 2025

Honestly, it would be a lot easier to believe this stuff if not for his history of promising to do one thing and then doing the exact opposite.

Private water company failures are already blocking new housing projects, by the way, and according to a recent report, the water demands of AI companies could have a similar impact. This is putting the government’s ‘build baby build’ strategy at risk, as we discuss further here.

“A growing number of water companies are objecting to planning applications on the basis that there is not enough local sewage treatment capacity to cope with the new homes required.”

Oh what an irony, dump baby dump becomes build baby build and creates an even bigger pile of…

— Feargal Sharkey (@Feargal_Sharkey) October 15, 2025

While we could potentially end up with a ‘non-profit’ model of water, this would essentially just limit the state’s ability to act decisively when needed:

In July, we set out three recommendations to fix our broken water system.

1. Take Thames Water into special administration
2. Put clean water at the heart of regulation
3. Design a more accountable water system, free from profiteering

Learn more 🔗⬇️ https://t.co/ZSzdsHnS3q

— Common Wealth (@Cmmonwealth) October 23, 2024

As we’ll discuss, an ability to act decisively will only become more and more necessary in future.

A “critical national challenge”

The Government Digital Sustainability Alliance (GDSA) was established to provide guidance on how we can achieve “digital transformation” without putting sustainability targets at risk. In aid of this, they published a report titled Water use in AI and Data Centres.

The GDSA reported (emphasis added):

The existing and projected UK water scarcity, driven by climate change, population growth, and infrastructure issues, creates a highly vulnerable context into which AI’s additional water demand is being introduced. This situation is not merely adding to an existing problem; it is exacerbating an already critical national challenge.

While the GDSA report isn’t explicit on this, the ‘infrastructure issues’ they highlight are issues of privatisation.

Speaking on the extreme droughts in 2022, the GDSA noted that water companies resorted to “emergency measures like tankers and bottled water
to maintain continuity of supply”. This is exemplary of the rot we’ve allowed to fester in the UK.

Because greedy water companies failed to adequately invest, they had no spare capacity when we needed it most. And if you’re tempted to think it’s their problem, just remember it’s ultimately the public who pay for private failures through bill hikes.

As an example of how AI data centres will create a “dangerous feedback loop”, the GDSA note that the next time we have a heatwave data centres will require additional cooling. This will further stress water availability – potentially turning problems into disasters (and disasters into catastrophes).

There are multiple regions in the UK which are classified as “seriously water stressed”, including those managed by the following regional monopolies:

• Affinity Water.
• Anglian Water – East Anglia.
• Essex and Suffolk Water.
• South East Water.
• Southern Water.
• Thames Water.
• Cambridge Water.
• Portsmouth Water.
• South Staffordshire Water.
• South West Water – Bournemouth.
• South West Water – Isles of Scilly.

AI data centres are reckless

Demonstrating the complete recklessness of this current government, Starmer has continued to greenlight new AI data centres in areas like Waltham Cross, which is covered by Thames Water. And as the GDSA reported:

Previously, water companies like Thames Water had no legal obligation to service businesses and could, in principle, restrict water supply during periods of scarcity. Thames Water, for example, had warned data centres of potential restrictions during heatwaves and even objected to planning applications for new data centres due to water concerns.

As the government has granted AI infrastructure the status of ‘Critical National Infrastructure’, “data centres will likely face fewer restrictions on water access, even in water-stressed areas”.

This demonstrates the state of affairs we’re in.

Despite being the land of drizzle, England has a growing number of water deserts. And increasingly, Britons will go thirsty as corporations running AI data centres duke it out over who can waste the most water.

Featured image via the Canary