Water sector: an attractive opportunity?

Investor interest in the UK water sector has surged — and with good reason. Ofwat has approved a record £104bn investment programme for AMP8 (2025–2030), representing a substantial uplift from the previous period and marking the most ambitious modernisation cycle the sector has undertaken. This investment is targeted at upgrading ageing infrastructure, improving environmental performance, and accelerating the adoption of smarter, more resilient technologies. Historically, AMP cycles frequently exceed initial budgets, suggesting real spending could surpass the headline figure.

The fundamentals of the sector remain highly attractive. Water assets offer long‑term revenue stability, underpinned by essential service demand and the long-term need to address leakage, pollution, drought resilience, and population growth. Major programmes focused on cleaner rivers, new supply infrastructure, and improved resilience reinforce a sustained pipeline of investment over the coming decade.

However, there are challenges investors need to keep in mind. Regulatory scrutiny is intensifying, driven by environmental standards, political pressure, and a push to rebuild public trust. New accountability measures and performance expectations are tightening across the industry. At the same time, the sector faces a significant labour shortage, with around 100,000 new workers needed to deliver AMP8 commitments and replace retiring staff. The scale of challenge in the sector is illustrated by the fact that the approved £104bn investment is still less than operators requested.

Despite these pressures, the opportunity set remains substantial. Areas likely to attract investor attention include:

• Infrastructure and maintenance services, offering resilient, recurring revenue.
• Digital and efficiency technologies, including predictive maintenance, smart networks, real‑time monitoring, and analytics.
• Cybersecurity, reflecting the growing digital footprint and rising threat landscape.

Overall, while not without operational and regulatory challenges, the UK water sector in 2026 presents an attractive combination of scale, long-term stability and opportunities to deliver meaningful improvements to an essential public service.

To discuss any of these themes in more detail, please contact:

Matt McNally

mmcnally@armstrong-ts.com
+44 7894 736 523