The Environment Agency has declared severe drought across parts of southern England, adding fresh pressure to farmers whose losses are largely uninsured and to home insurers already facing record subsidence claims.
The declaration covers parts of Cornwall, Devon, Dorset, Somerset, East Sussex and West Sussex, following a review by the National Drought Group. The government said the South East and South West had their driest April to September in more than a century, after the hottest summer on record.
The move was prompted by concerns over two major reservoirs. Wimbleball on Exmoor, which serves around 300,000 properties across Devon, Somerset and west Dorset, is at 14.9% capacity. Ardingly in West Sussex, serving 280,000 customers, is 19.4% full. The Environment Agency would normally expect storage of around 75% at this time of year.
The agency has granted South East Water and South West Water drought orders allowing them to cut the volume of water released from reservoirs into rivers. Ministers have told water companies to monitor reservoir and river levels daily. The Environment Agency will also step up checks on businesses that take water directly from rivers and groundwater, to make sure they stay within their permitted volumes.
A hosepipe ban has been in force across Devon, Cornwall, the Isles of Scilly and parts of Dorset and Somerset since August 8. The government said household supplies would not be interrupted. The Environment Agency’s latest drought report shows storage continuing to fall at most reservoirs in England.
For agriculture, the drought is largely an uninsured loss. Standard UK crop insurance mainly covers perils such as hail and fire. Cover for yield loss caused by drought is rarely available, so lower harvests, poor forage and higher feed and irrigation costs fall mostly on farmers themselves.
Paul Tompkins, deputy president of the National Farmers’ Union (NFU), described a torrid year for farmers. He said a dry winter could also affect next year’s crops.
The NFU has been lobbying the government for a short-term “Keep Britain Growing” loan to give farmers financial breathing space, alongside more flexible water abstraction licences and simpler planning for on-farm reservoirs.
The insurance market has begun to test alternatives. In 2023, NFU Mutual piloted a parametric heat-stress product for dairy farmers. It pays out automatically when temperatures pass set thresholds rather than on assessed losses. Parametric cover for rainfall deficit is used for agriculture in other countries, but remains rare in the UK.
The new abstraction checks also carry a liability angle. Farms and businesses that exceed their licensed volumes risk enforcement action, which may fall outside standard cover.
For home insurers, the drought extends a costly year. Subsidence claims hit a record in August at some insurers, as Insurance Business reported last month. Insurers paid £72 million on domestic subsidence claims in the second quarter alone, after a record £307 million in 2025, according to the Association of British Insurers (ABI).
Subsidence damage typically shows up through late summer and autumn, and a dry winter would keep clay soils shrunk for longer. Deloitte has forecast UK home insurers will post a combined ratio of 102.1% in 2026, an underwriting loss.
Dry ground also raises the risk of wildfire on heathland and farmland, with exposure for rural property, crops, machinery and liability where fires spread.
Businesses that rely on mains water also face risk if restrictions tighten. Interruption to water supply is often excluded from standard business interruption cover, or available only as a limited extension.
For rural and farm brokers, the drought is a chance to talk to clients about protection gaps. Most farm policies won’t respond to drought-related yield or forage losses. Brokers should explain this clearly and check whether abstraction liability, wildfire cover and machinery fire risks are adequately covered.
For home insurance brokers, it means preparing clients in clay-soil areas for continued subsidence activity and possible repricing at renewal. For commercial brokers, it’s worth checking whether clients that depend on water, such as food processors, hospitality and leisure businesses, have any utilities interruption cover in place before restrictions extend.
