Ministers must consider revamping water regulation and the system of charging for water supplies, the ICE has said.
Its comment follows the government’s drought summit two weeks ago. At the summit environment secretary Caroline Spelman met with water companies, farmers and environmental groups to brief them on the situation.
Earlier this month, the government declared five eastern counties to be in a state of drought after what has been the driest spring for over 20 years.
The ICE said: “the droughts are a timely reminder that we need to urgently reduce demand for water so that we don’t find ourselves increasingly facing shortages in the future.
“The regulatory framework and way we charge for water must change to drive more efficient behaviour and encourage industry to build more resilience into its infrastructure.”
Rocketing food prices are predicted as crops fail and the government has come under increasing pressure to deal with the lack of water.
An Environment Agency spokesman said: “Lincolnshire, Cambridgeshire, parts of Bedfordshire and Northamptonshire and western Norfolk are now suffering from a drought. We have been closely monitoring the conditions.
“A number of factors are taken into account before drought status is confirmed, including river flows, groundwater levels, risk to the environment and agriculture.”