The UK is building data centres faster than ever. But there's something quietly complicated happening in the background – and if you're investing in this space, you need to know about it.

Data centres are thirsty. They use a huge amount of water to keep servers cool. As the UK's data centre pipeline grows, so does the pressure on already stressed water supplies – and the legal risks that come with them. For most of the industry's growth story, that's been an afterthought. Not any more.

There are now three separate bodies of law that can stop a data centre project: abstraction licensing, environmental impact assessment, and habitats protection rules. They each operate independently. Clear one hurdle, and you still have to clear the others. Any single one can be the thing that kills a deal.

The habitats rules are the ones that really catch people off guard. If your site draws on a water source near a protected habitat, the bar to override a negative environmental assessment is genuinely very high – you'd need to show there's no realistic alternative and an overwhelming public interest case for the project to go ahead. For some sites, that's a dead end.

Parliament tried to plug a gap. The government said no.

In May 2026, a House of Lords committee published a report, Surviving drought: reclaim the rain, that recommended making water companies statutory consultees on all major planning decisions, data centres included. The government accepted most of the Committee's recommendations in July 2026. But not that last one.

Here's why that matters. For the vast majority of data centre applications – those going through ordinary planning rather than the nationally significant infrastructure projects route – water companies are currently not statutory consultees. There's no requirement to ask them anything before planning permission is granted.

Water companies aren't powerless. They can refuse a connection to the sewer system under the Water Industry Act 1991 if capacity won't support it. But by the time that happens, you may already have planning permission. A refusal at that stage can collapse a deal.

The fast-track route isn't the safety net it looks like

Since data centres were designated Critical National Infrastructure in September 2024, developers can apply to have the Secretary of State decide their application rather than a local planning authority. Sounds appealing...

The same environmental tests apply regardless. But the pre-application requirement to consult the local community has been removed for projects taking this route – something parliament's Secondary Legislation Scrutiny Committee specifically criticised as stripping out local democratic input on water and resource concerns.

There's also a significant caveat: the government still hasn't published the National Policy Statement for data centres that will set the rules for which projects actually qualify. Developers are currently trying to navigate a route without signposts.

Getting planning permission isn't the finish line

A data centre with planning permission today can still find itself in trouble later. Water companies publish five-yearly Water Resources Management Plans that balance new demand against existing obligations. A data centre that gets permission now can still face a situation where connection or abstraction becomes unviable within that planning timeline – especially in catchments where existing licences are already under review.

The courts have been clear that voluntary water efficiency commitments by a developer don't let the Environment Agency off the hook for its own statutory duties. And parliament has recently tightened water company accountability through the Water (Special Measures) Act 2025 – so the scrutiny on this is only going one way.

The bottom line

The current regulatory picture is not stable. The government's own response in July 2026 flags further reform through local plans, spatial development strategies, and a future water sector white paper – all under active consideration.

If you're buying a site, funding a development, or advising on a data centre deal – water needs to be on your list from day one, not after permission has been granted.

Our planning and environment team works across the full data centre consenting lifecycle. Get in touch to talk through what this means for your project.