The Department of Environment, Food and Rural Affairs (Defra) has announced a £65 million package aimed at helping farmers that were affected by drought this summer.
Part of this investment will include £15 million, which will be allocated to build on-farm reservoirs.
This forms part of the new £104 billion government investment which will see an overall upgrade to water infrastructure.
The investment involves building nine new reservoirs across the country to increase water supply.
An additional £100 million will be allocated to strengthen the country's capacity to respond to extreme weather and wildfires.
This comes as parts of Cornwall, Devon, Dorset, Somerset, East Sussex and West Sussex have experienced the driest April to September in over a century, impacting reservoir levels in those areas.
Chief executive of the Environment Agency, Philip Duffy said record-breaking heat has put water resources under immense pressure.
“Recovery depends on both rainfall and how much water we use. We cannot change the weather, but water companies can act now.
“We are also asking everyone to use less water. That will leave more in our rivers and the environment, helping farmers and protecting wildlife and nature," Duffy said.
Concerns surrounding two major reservoirs, Ardingly in West Sussex and Wimbleball in Somerset, have prompted the latest change in drought status.
Both these reservoirs serve a large number of people with 95,000 properties being served in Ardingly and 300,000 in Wimbleball.
According to the Environment Agency, they each are less than 20% full, while they would be expected to be around 75% for this time of year.
Environment Secretary, Dame Angela Eagle stated that this is one of the worst droughts experienced in the past decades.
She said: "We are working closely with water companies to protect public supplies in the areas affected, and I'd continue to urge everyone to think about how they can use water wisely over the coming weeks.“
Eagle said that the improved Water Bill is about taking back public control of UK water companies.
“We are at the start of a decade-long journey to a very different water system, including nine new major reservoirs to secure supplies."
The announcement follows the latest meeting of the National Drought Group, which involves the Met Office, Government, regulators, water companies, the National Farmers’ Union, the Canal & River Trust, anglers, hydrologists, and conservation experts.
Water companies have been requester to step up drought planning, as the government takes measures to protect customer supplies in areas entering severe drought.
The government plans to instruct water companies to conduct daily monitoring of reservoir and river levels as well as carrying out tougher water quality monitoring.
An increase of compliance checks on businesses that withdraw water from natural sources will be carried out by the Environment Agency to ensuring they are only taking permitted water quantities.
Water Minister Emma Hardy has instructed the Environment Agency to prioritise public water supplies in areas affected by severe drought.
This means allowing water companies to keep more water in depleted reservoirs.