Water bill decision a "double edged sword"

Britain’s biggest business organisation welcomed Ofwat’s tough line on five year water price hikes, but is disappointed that the regulator is allowing many water companies to increase their bills by more than 10 per cent next year.

Water bills look set to go up by an average of 7.6 per cent in 2005 but Welsh Water, Severn Trent, South West Water, and Thames are among the water companies permitted to put up their prices by over 10 per cent.

But Ofwat’s Director General of Water Services, Philip Fletcher took a tougher line over their longer term spending plans – telling water companies that they can only put up their rates by an average of 13 per cent over five years – less than half the amount desired by the industry.

In May water companies proposed average rates hikes of 29 per cent. The industry claimed it needed extra revenue to update and maintain aging pipes, improve water quality and comply with environmental legislation.

But the FSB warned such dramatic increases would catch small businesses by surprise, and urged Ofwat to ensure that price limits were no higher than necessary to update aging infrastructure.

FSB Environment Chairman John Holbrow said: “The decision is a double edged sword for small businesses. On the one hand they will breathe a sigh of relief that Ofwat has reeled in the water companies. But on the other hand they will still have to face significant price hikes next year.”

“Small firms need to carefully budget their outgoings and rely on predictable and stable utility services. An increase of more than 10 per cent in one year is well above inflation and will be difficult for some businesses to accommodate – especially high water users looking at increases of well over £300.”

“Ofwat sets its final price limits in December and the FSB will continue to ensure that the small business voice is heard.”