As I write, the Thames is overflowing on to the riverside paths leading to the In Business office — but by the time this magazine appears, we could all be facing a hosepipe ban.

New technology has improved weather forecasting in ways our grandparents could only dream of, but climate change means we can expect more floods and more droughts as the 21st century gets into its stride.

In Europe, we all expect to turn on our taps and find drinkable water, but this could be a big challenge for water companies in future. Areas of Spain, Portugal and Italy are predicted to become more and more desert-like, but even soggy Britain faces problems managing its water supplies.

Oxfordshire software developer Red Skies is one of six companies in a European consortium sharing a £3.4m research grant to develop ‘smart’ technologies that could help to secure our future supplies.

Its founder, space-mad entrepreneur and IT expert Darren Oliveiro-Priestland, said: "We specialise in 'extreme computing' involving massive amounts of data, and we have been focusing on specific industries such as space, water utilities and media."

The EC-funded UrbanWater management platform aims to use the latest high-tech systems to meet the challenges facing urban areas around the world.

Red Skies, based next to the European Space Centre at Harwell, is developing state-of-the-art cloud infrastructure, high-performance computing for live data modelling and prediction, while other UrbanWater consortium partners, such as Scottish Water, look at how they would work on the ground.

Each partner will own the intellectual property of its own innovations, and will be able to sell them worldwide.

In March, Red Skies will be joining a UK trade mission to visit three cities in South West China, which has a history of cheap water prices and low investment, to see how its network can be updated.

Mr Oliveiro-Priestland said: “It is similar to what is happening in the energy sector with smart meters, etc, but there are more challenges with water, partly because the infrastructure is a lot older.”

One feature that could be useful to Thames Water, with its Victorian pipe system, is automated location and notification of water leaks.

Mr Oliveiro-Priestland says several UK water companies are interested because they could save up to £154m a year if engineers could trace water leaks online in the office, without having to travel miles and dig up our roads to investigate.

He said: “It is worth a lot to be able to track leaks more quickly using GPS, and to be able to take quick decisions.”

Another idea copies Economy 7 electricity metering, by using adaptive pricing to encourage use of water off-peak, with householders using electronic devices to show the most cost-effective times to have a bath.

Electricity demand pricing is relatively simple — it is cheaper at night when most people are alseep — but water demand is more complicated as it is higher in the summer when vegetables and gardens need irrigation. The Red Skies software would enable water suppliers to tell householders immediately demand drops or rises.

Mr Oliveiro-Priestland said: “You have an instant view of how much water is being used in the system. If a lot of water is being taken out of the network, with heavy demand, it should be more expensive. People could collect water at cheaper times.

“There could be a traffic-light system, so that when there is a red light, you know it is expensive. When it is green, that could be the time to take a bath.”

Smart meters could be one of a new generation of home appliances to help us manage water use at home and at work.

Red Skies has three software engineers working on new forms of web service and cloud technologies to allow hundreds of millions of smart meters, pressure and water-level sensors and other data to be fed into the system, along with weather reports, seasonal and historic trends to warn of future water problems.

Mr Oliveiro-Priestland said: “We are developing a modular system and one will use data from the Met Office to show the likelihood of water shortages in, say, one week or three months. For this, we have to use five years of weather data and integrate it with live weather data and water supply data, to help to predict the likelihood of shortages. That allows the water companies to start planning in advance.”

There will even be an UrbanWater game, which integrates with the system to educate consumers about their water use in a fun way.

We are also promised automated billing, with a web portal where consumers can see immediately how much water they are using.

And, as Mr Oliveiro-Priestland points out, smarter systems could help slow the climate changes which cause drought.

“It should cut water companies’ carbon use, because it will save on transport and electricity bills. We are getting a lot of interest from water companies and we hope that we can interest more of them to set trials up.”