The drought in Britain’s South West region could last beyond Christmas, according to the Environment Agency, which is urgently warning businesses and people to use water wisely or risk “serious shortages”.

Seventeen counties in South West England and the Midlands have moved into official drought status, after two dry winters have left rivers and ground waters depleted, says the agency.

Trevor Bishop, Head of Water Resources at the EA said: “A longer term drought, lasting until Christmas and perhaps beyond, now looks more likely – and we are working with businesses, farmers and water companies to plan ahead to meet the challenges of a continued drought.”

Experts are now hoping for a steady rainy winter in 2012/13 to restore rivers and groundwaters but the Environment Agency is working with the water industry to put plans in place now to deal with the prospect of a third dry winter.

Mr Bishop added: “While we’ve had some welcome rain recently, the problem has not gone away, and we would urge everyone – right across the country – to use water wisely now, which will help to prevent more serious impacts next year.”

The news comes as water companies Severn Trent and Anglian announced last week they are considering virtually unheard of plans to trade water.

The South West region covers Cornwall, Devon, Dorset, Somerset, Bristol, South Gloucestershire, parts of Hampshire and most of Wiltshire. The Midlands region covers Nottinghamshire, Leicestershire, Derbyshire, Staffordshire, West Midlands, Warwickshire, Shropshire, Worcestershire, Herefordshire and Gloucestershire.