Campaigners and experts say the water industry has failed to invest in drought prevention, and called for a public inquiry.
In recent weeks it was revealed water firms sold off emergency drought reservoirs to developers.
A £250million plant built by Thames Water was switched off.
It was also revealed that no new reservoirs have been opened in the past 30 years, during which time the population has increased by 10 million.
Firms let nearly three billion litres leak away daily, and pollute rivers and seas, it is claimed.
Campaigner and former pop star Feargal Sharkey said: “There should be a public inquiry into how the water industry and regulators got themselves into this sorry mess.”
Last year water firms made £2.8billion in operating profits.
Lib Dem Environment spokesman Tim Farron said: “Conservatives ministers can’t be trusted to hold these profiteering polluters to account.
“A public inquiry would finally give the public answers.”
Prof Jamie Woodward, of the University of Manchester, also called for a probe.
He said investment in infrastructure had fallen every decade since privatisation, and that firms were known to under-report sewage discharges.
Dragons’ Den star Deborah Meaden accused the water industry of complacency.
Industry body Water UK said leakage was at a record low and that investment included £500m in the London Ring Main. It said some old storage systems were disposed of and replaced.
New reservoirs had been blocked by planners or regulators, it said, but that one is being built in Hampshire.
