The industry needs to lead by example in reducing leakage to ensure water resources are secure in the face of a changing climate and a growing population, Environment Agency chairman Lord Chris Smith will warn.
Water companies must take steps to prevent sewers overflowing during heavy rains, which can lead to flooding of people's homes and businesses, and cause pollution in rivers, beaches and bathing waters.
Speaking at the Institute of Water's annual conference later, Lord Smith will acknowledge that water companies have made strides in improving environmental protection and cutting leaks from pipes and networks. But up to 20% of water is lost through leaks from water companies' networks and customer supply pipes, and two-thirds of sewers carry both sewage and rainwater and can overflow in periods of heavy rain.
Last year, water companies faced criticism for bringing in hosepipe bans for 20 million people in the face of drought conditions while heavy rain later in 2012 led to a fall in bathing water quality at the coasts as pollution was washed to the sea.
Lord Smith will tell the conference: "Clean, healthy and readily available water is essential for people's health and wellbeing as well as for economic growth. But a changing climate will reduce the availability of water and population growth increase demand for it.
"Water companies need to make better use of their resources by sharing water within their networks and with neighbouring companies. They need to help their customers be more water efficient - but they must lead by example by reducing leakage further.
"2012, with its droughts and floods, put the resilience of the water network into sharp focus. One in every five days saw flooding in 2012, but one in four days were in drought, including hosepipe bans affecting over 20 million people. Water companies have an opportunity this year to make big, long-term improvements to their infrastructure through the periodic review process and ensure the water industry in this country is fit for the future."
In 2010/2011, six water companies failed their leakage target. Last year, all met their leakage targets, but the goals still allow as much as a quarter of water supplies to be lost through leaks.