The Environment Agency has published plans ordering Southern Water to reduce its abstraction from the River Test by 40 per cent.
New licence revisions will mean the level of abstraction permitted will be cut from 136 to 80 million litres per day.
Abstraction will also be restricted when river flow drops below 355 million litres per day.
The current licence only restricts below 91 million.
The Environment Agency said the changes are necessary to protect the wildlife and ensure sustainable abstraction in future.
In a statement, Southern Water said: “Our new draft Water Resources Management Plan is currently under preparation and due for public consultation in early 2018. We will consider all the options (including desalination, water recycling and transfers from neighbouring water companies) for the alternative new supplies we need and how long it will take to implement these”.
The River Test has been described by Hampshire and Isle of Wight Wildlife Trust as a “globally rare” chalk stream and is a designated site of specific scientific interest.
The new plans follow a report from the World Wildlife Fund that said “over half of chalk streams and a quarter of rivers in England are currently at risk due to poor water management and usage”.
A Southern Water spokesperson also said that the Environment Agency has previously asked it to vary all five abstraction licences in Hampshire
The company is licensed to source almost half of south Hampshire’s public water from the Test, but it claims that only around a third is actually drawn from the river, with the rest coming from groundwater and the nearby River Itchen.