The UK government is considering adding the water industry to its list of sensitive business sectors, which would subject potential deals to heightened scrutiny. This move comes amid regulatory reforms aimed at addressing financial difficulties faced by key players in the sector, such as Thames Water and Southern Water.
Currently, 17 sectors, including communications, energy, and data infrastructure, must inform the investment security unit about certain business transactions. The proposal would extend this requirement to the water industry in response to growing concerns over its resilience in an increasingly volatile market.
The Cabinet Office has stressed that this change is not expected to affect a significant number of deals but is intended to strengthen the government’s ability to oversee high-risk transactions. The goal is to align investment security with the evolving landscape of the economy, ensuring the regulatory framework remains fit for purpose.
Recent financial struggles within the sector have underscored the need for tighter controls. For example, Thames Water is currently seeking funding to stabilise its finances, while Southern Water has requested additional support from its Australian owner.
As part of the overhaul, the government also plans to reclassify certain industries, such as semiconductors and critical minerals, into distinct categories to streamline the scrutiny process.
