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What is ‘water bankruptcy’?

The United Nations published a landmark report on global water bankruptcy in January 2026.

The report sets out that droughts, water shortages and pollution incidents across the world have meant that many river basins and aquifers have lost their ability to return to their historical ‘normal’ states. It states that while these shocks may once have been seen as temporary crises, they are becoming prolonged and near permanent in many places, signalling that many regions are entering ‘water bankruptcy’.

What is ‘water bankruptcy’?

The United Nations report defines ‘water bankruptcy’ as a condition in which repeated crises become chronic states, with persistent shortages or damages meaning that many water systems can no longer return to their historical baselines. The report states that water bankruptcy is a condition “defined by both insolvency and irreversibility”.

The UN argues that many countries have entered their ‘water system overdrafts’ through consistently overusing renewable water flows, which reduces the capacity of rivers and other watercourses to replenish themselves on normal timescales.

The report finds that many countries and cities are “living beyond their hydrological means”, a situation that it says is exacerbated by climate change, poor agricultural management, over-abstraction of groundwater, deforestation, and pollution incidents.

The report also finds that around four billion people experience severe water scarcity for at least one month each year, while the effects of continued droughts are estimated to cost around US $307 billion annually.

The UN’s report was published in the same week as analysis from the Guardian and Watershed Investigations, which found that over half of the world’s largest cities are experiencing high levels of water stress (including London), with 39 experiencing “extremely high water stress” (including Beijing, Delhi, Los Angeles, New York and Rio de Janeiro). This analysis applied NASA satellite data showing which cities have been drying or getting wetter over the past 20 years (compiled by University College London) to maps of water catchments in an interactive Water Security Atlas. Some notably water-scarce cities (including Chennai and Tehran) were classed as experiencing significant drying.

Assessment by the World Bank confirms that many water systems are at risk of ‘continental drying’ following poor land and water management, using modelling that also builds on 20 years of NASA satellite data to identify global hotspots. It warns that under current practices, the world is losing 324 billion cubic meters of freshwater every year (324 trillion litres, equivalent to combined annual flow of Western Europe’s four largest rivers), enough to meet the needs of 280 million people every year.

What happens when a city runs out of water?

‘Day zero’ is a term that is commonly used to refer to the point at which a city or other location runs out of water entirely.

It was popularised during the Cape Town water scarcity crisis in 2018, when officials started counting down to day zero, although this point was never actually reached. It has since been applied to other water scarcity crises internationally, including during the Chennai water scarcity crisis in 2019.

In 2025, Tehran was in its sixth consecutive year of drought, following rainfall reportedly close to zero, overexploitation of groundwater, and incredibly low reservoir capacity. Officials warned that day zero could soon arrive in Tehran, and in December 2025, Iran’s President said that the city may have to evacuate should the lack of rainfall continue. Towards the end of the year, rainfall increased, but drought persisted across much of Tehran and protests continued.

Responses are not always as dramatic as the evacuation proposals tabled for Tehran; in Cape Town, the response focused on significantly reducing domestic water use, while in Chennai the response focused on procuring water tankers and emergency supplies. However, in each case, the people who were most affected were the most vulnerable, who consequently were also the least capable of adapting.

In 2026, Moldova declared a state of emergency over water and energy shortages, giving officials powers to intervene where necessary to maintain supplies. Officials said that a severe hydrological deficit along the Dneister River was driven by drought across Europe.

What does water scarcity mean for the UK?

While the UK is known for its grey skies, it too is at risk of long-term water scarcity.

The Environment Agency projects that, by 2055, England will face a shortfall of over 5 billion litres of water a day in meeting the public’s demand for water. How severe such a deficit will be in practice will be influenced by the balance of water supply and demand factors; the government’s national framework for water resources sets out actions to address future scarcity, including increasing the water available to the natural environment while managing demand from energy, food and emerging sectors.

However, even if the UK manages its domestic resources efficiently, it will still face the knock-on effects of international water bankruptcy on trade, migration and geopolitics. The UK may:

• need to provide more aid to especially water-scare countries
• find that the prices of water-intensive goods (such as food, clothes and cars) go up
• find that some water-intensive goods are no longer accessible

What does the report recommend?

The concluding message of the UN report is not that water bankruptcy is the end for countries facing significant shortages of water.

Instead, the report calls for a transition from existing crisis response to water bankruptcy management. The report suggests that countries should:

• learn from the financial sector’s approach to bankruptcy and apply this to water bankruptcy, where it occurs
• protect remaining groundwater resources
• recentre policies to reflect a ‘new normal’ for water resources, where these have lost the ability to return to their historical normal states
• take early action to address drivers of water scarcity before these result in irreversible losses