Developing Water-Smart Industrial Clusters

Water is increasingly emerging as a defining constraint on the United Kingdom’s industrial future. This is not simply a question of long-term environmental pressure or resource scarcity, but a more immediate and structural issue: water is beginning to shape the geography, timing, and viability of industrial investment. Despite this, it remains comparatively underdeveloped within the broader architecture of industrial policy.

Much of the current strategic focus—both in government and industry—has centred on energy systems. Considerable attention has been paid to grid capacity, renewable generation, hydrogen production, and carbon capture. Yet this emphasis obscures a critical interdependency. Many of the sectors driving the next phase of industrial transformation are not only energy-intensive, but also highly dependent on reliable, scalable water supply.

As such, the absence of a coherent, system-level approach to water risks undermining the very ambitions these strategies are designed to achieve.

Recent discussions on water-smart industrial clusters have brought this tension into sharper relief. What becomes apparent is that the challenge is not reducible to a simple deficit of water resources. Rather, it lies in the way water is conceptualised, governed, and integrated into planning processes. The prevailing model continues to treat water as a localised, largely reactive utility, even as demand becomes more complex, concentrated, and strategically significant.

Structural Limitations of the Current Model

The dominant framework for water management in industrial development is highly decentralised. Individual projects are responsible for forecasting their own demand, securing supply connections, and managing wastewater within defined site boundaries. This approach has historically been sufficient, largely because demand was stable and infrastructure systems operated with surplus capacity.

However, under conditions of rapid industrial change, this model reveals its limitations. As Catherine Darby-Roberts has noted, water is no longer a peripheral consideration but a factor that determines “whether investment can happen, how quickly and at what cost”.

“Water has moved from being a background utility issue into a strategic determinant as to whether investment can happen, how quickly and at what cost.” - Catherine Darby-Roberts, Associate Director, Arup

In other words, water has moved from an operational input to a strategic variable.

When multiple large-scale, water-intensive developments emerge within the same geographic cluster—as is increasingly the case in regions pursuing industrial decarbonisation—the fragmentation inherent in the current system produces inefficiencies.

Infrastructure is duplicated rather than shared, cumulative impacts are not fully understood until late in the planning process, and the capacity of the system is misjudged. These outcomes are not incidental; they are the logical consequence of a governance structure that prioritises individual optimisation over collective coordination.

Industrial Transformation and Infrastructure Misalignment

This structural issue is compounded by a growing misalignment between industrial policy ambitions and infrastructure planning logic. The UK is actively seeking to accelerate investment in sectors such as hydrogen, carbon capture and storage, advanced manufacturing, and digital infrastructure. These sectors are both strategically significant and resource-intensive, with water playing a central—if often implicit—role in their operation.

Yet water infrastructure has not been integrated into this agenda with equivalent urgency. Energy systems are increasingly planned at scale, with an emphasis on networks, interconnection, and long-term capacity. Water systems, by contrast, remain largely governed through localised frameworks, with investment typically justified on the basis of demonstrated demand rather than anticipated need.

This divergence creates a policy asymmetry. One system is being reconfigured to meet future requirements, while another remains anchored in past assumptions. The risk is that water becomes a binding constraint, not because of absolute scarcity, but because the system lacks the flexibility and foresight to accommodate new patterns of demand.

Towards a System-Level Approach

Addressing this challenge requires a shift in perspective—from site-level management to system-level planning. Industrial clusters provide a useful framework for this transition, not merely as geographic concentrations of activity, but as functional units within which infrastructure can be coordinated.

At this scale, new efficiencies become possible. Water demand can be aggregated, allowing for more accurate and stable forecasting. Variations in quality requirements can be managed more effectively, enabling the reuse and cascading of water between different industrial processes. Infrastructure can be designed for shared use, reducing duplication and improving overall system efficiency.

As Colin Robinson from Evides has suggested, businesses are increasingly recognising water as a strategic risk, but the critical step lies in extending that awareness beyond individual sites to encompass the wider industrial ecosystem . This reframing transforms water from a constraint to be managed into a system to be optimised.

“We’re seeing more and more businesses now take their water and their wastewater as a strategic business risk.” - Colin Robinson, UK Business Manager, Evides Industriewater

Importantly, this is not solely a question of efficiency. It is also a matter of resilience and capacity. By coordinating demand and enabling reuse, system-level approaches can create additional headroom within existing resource limits, thereby supporting further growth without proportionate increases in abstraction.

Water as a Prerequisite for Net Zero

The relevance of this issue becomes particularly acute when considered in the context of the UK’s net zero ambitions. Technologies such as green hydrogen are frequently discussed in terms of their energy requirements, yet their dependence on water is equally fundamental.

Gabrielle Gill has noted, that hydrogen production relies directly on water, and at scale “water availability and infrastructure start to determine whether projects are feasible” . This introduces a critical interdependency between water systems and energy systems—one that is not yet fully reflected in policy or planning frameworks.

“Green hydrogen requires water as its key feedstock… it makes it a fairly water-intensive industry, especially at scale.” - Gabrielle Gill, Process Engineer, Centrica Energy Storage +

If water infrastructure is not developed in parallel with energy infrastructure, there is a risk that decarbonisation efforts will be constrained by an enabling system that has not kept pace. In this sense, water is not merely a supporting factor in the transition to net zero; it is a prerequisite.

Governance and Institutional Constraints

While the technical case for more integrated water management is relatively well understood, the principal barriers to implementation are institutional. Responsibility for water is distributed across a range of actors, including water companies, regulators, developers, and local authorities. Each operates within its own set of incentives, regulatory constraints, and planning horizons.

Importantly, Catherine has argued, “the biggest barrier isn’t actually technical—it’s institutional” This fragmentation makes it difficult to coordinate investment, align timelines, or develop shared infrastructure solutions. It also complicates the allocation of costs and benefits, as the gains from system-level optimisation are often distributed across multiple stakeholders.

From a policy perspective, this raises fundamental questions about governance. Effective system-level planning requires mechanisms for coordination, data sharing, and joint decision-making—capabilities that are not easily accommodated within existing institutional structures.

The Limits of Forecast-Led Planning

A further challenge lies in the reliance on detailed demand forecasting as the basis for infrastructure investment. While data-driven approaches are essential for efficient system management, they can also introduce delays when used as a prerequisite for action.

As Jonathan Oxley, the Senior Manager of Energy Transition at the Confederation of British Industry has noted, the pursuit of a “perfect data-led answer” can become counterproductive, particularly in dynamic environments where underlying assumptions are subject to change . In such contexts, an overemphasis on precision may inhibit the timely development of infrastructure.

Historical experience suggests that major infrastructure systems are often built on the basis of anticipated need rather than exact forecasts. This requires a degree of strategic judgement and a willingness to accept uncertainty. Robinson’s observation that earlier water transfer schemes were constructed at scale and subsequently utilised underscores this point .

The implication is that current planning frameworks may need to evolve towards a more anticipatory model, particularly in sectors undergoing rapid transformation.

Conclusion: Water as a Strategic Determinant

The role of water within the UK’s industrial strategy is undergoing a fundamental transformation. No longer a passive input, it is becoming an active determinant of what is possible—shaping investment decisions, influencing project timelines, and defining the limits of growth.

This shift demands a corresponding evolution in policy and planning. Water must be integrated into industrial strategy at a system level, with greater emphasis on coordination, shared infrastructure, and long-term capacity.

The challenge is not simply one of supply, but of structure. It is about aligning governance, incentives, and investment frameworks with the realities of a changing industrial landscape.

As the UK moves into a new phase of development characterised by scale, speed, and complexity, water will play an increasingly central role.

Join us for more episodes of our water webinar series.

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