Why is England in a drought?

Dry winters have left some of the country in drought and facing hosepipe bans. What's going on? James McKeigue reports.

What happened?

Following two dry winters, much of east and southeast England is affected by drought. As a result, seven water firms, covering 20 million people across the affected areas, will introduce hosepipe bans from 5 April. While this is news for some areas, such as London, others, like Cambridgeshire and Lincolnshire, have been experiencing drought since last summer.

How will this affect the economy?

The most serious threat is to agriculture. Seasonal crops, such as strawberries, potatoes, barley and hops, could be badly hit. That would push up prices for goods such as crisps and beer, slowing the rate at which inflation is falling. A continued drought would also widen the trade deficit.

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Britain already imports 40% of its food and if domestic production falls, it will have to import more. It comes at a bad time for food exporters, who recently drew up the exports action plan' with the government, aiming to use the Olympics as an opportunity to win new markets. Britain's tourist industry could be affected too.

Why is there a drought if it rains so often?

Parts of Britain aren't as wet as you might think. The southeast of England has had less rainfall per person than Libya or Sudan, though that statistic is partly due to population explosion. Of course, other parts of the country are very wet: Scotland has had one of its wettest winters on record.

And there are the leaks. Companies' performances vary but, on average, 25% of the water sent to customers never gets there. Companies complain that leaks are hard to find and fix, yet given the industry makes billions in 2010 operating profit was £3.5bn many feel they could do more.

Last year, Anglian Water, one of the companies implementing a hosepipe ban, made £447m operating profit, but spent just £14m on fixing leaks. Price rises in April an average of 5.7% across the industry have also inflamed public opinion.

How can we stop this happening again?

The most dramatic idea is for a 'national water grid', transporting water from wet parts in the north and west of Britain to dry areas in the south and east. The idea was first mooted by the now-defunct Water Resources Board in the 1970s. The most recent proposal from northwest water firm United Utilities suggests laying a pipe alongside the high-speed rail link being built between London and Manchester.

Supporters say it would boost agricultural productivity and subsidise lower bills in the exporting' regions, but it has met stiff opposition. Environmentalists say moving water between regions will cause ecological damage, while the Environment Agency says it's too expensive.

Critics say the electricity grid analogy is flawed, as water is far heavier and more difficult to move. Instead, Lord Smith, head of the Agency, wants adjacent companies to build connections allowing them to share water more cheaply than through a grid.

Is it a case of time not space?

Michael Norton, head of the Institution of Civil Engineers' water panel, believes time is more important than space. "Too many people focus on transferring water from one area to another. Really, there is enough winter rainfall in dry' areas. We just need to get better at transferring water from winter to summer."

Reservoirs and improved storage on farms would be more effective and less costly than nationwide pipes. Even widespread use of garden water butts could make a "big difference".

Then there's our built environment. "Urban areas are mostly designed to get rid of water as soon as possible. Roads, pavements, drains, all carry the water away." Water could be diverted into underground aquifers, through permeable paving and redirected drains. Treated wastewater could also be pumped into groundwater supplies.

When is all this likely to happen?

Not yet. Privatisation is partly to blame. Regionally focussed companies are badly positioned to oversee nationwide solutions. The biggest water users are power stations and farmers, yet water companies are only responsible for drinking water and sewage. Water company spending and charges are negotiated with regulator Ofwat every five years. How much a company can charge is determined by its spending on infrastructure. But many drought solutions are not overseen by Ofwat. Permeable road drainage would need local and national authority support.

The industry recognises this and is pushing for a recent white paper Water For Life to be amended to make trading between companies easier. Discussions over the next round of spending for 2015-2020 also start soon. But it's unlikely they will solve the problem.

Importing 'virtual water'

Britain might be poor at transferring water within its borders but it already imports most of its water from far corners of the globe. If you account for every drop used to, say, grow animal feed, or mix paint resins virtual water' then producing clothes, food or manufactured goods uses large amounts of water.

Brewer SABMiller's facilities in South Africa use 155 pints of water to makeone pint of beer. The Royal Academy of Engineering estimates that two-thirds of the water Britain needs comes embedded in imported food, industrial products and clothes, yet re-balancing the economy towards manufacturing and agriculture would place further pressure on our water needs. More demand will come from population growth. Britain's population is expected to grow by 17.5% by 2035, with most growth in the southeast.