Fracking could contaminate drinking water with gas and chemicals, water companies have warned.

Industry body Water UK said hydraulic fracturing for shale gas would “inevitably” put a strain on water supplies around drilling sites.

The warning came as Chancellor George Osborne announced generous tax breaks for fracking companies.

Hydraulic fracturing uses water and chemicals to pressurise rock, releasing shale gas but putting significant demand on water resources.

Dr Jim Marshall, of Water UK, said: “The water companies’ main concern is the process could cause contamination by allowing gases such as methane into drinking water.

“Contamination can also be caused by chemicals used in fracking entering drinking water reservoirs through fractures or by poor handling of wastewater on the surface.”

A Southern Water spokeswoman said: “Although water companies would not wish to hinder economic development there is a view that the potential risks to water supplies (and in particular drinking water supplies) need to be assessed and where necessary mitigated to ensure the safety of our customers’ water quality is maintained.”

South East Water said it was working with Water UK as it researched the risks of fracking to drinking water.

A spokesman for campaign group Frack Free Sussex said: “Cuadrilla’s potential fracking site in Balcombe is less than a mile from the River Ouse and Ardingly reservoir – both of which are drawnon for drinking water to supply many homes in Sussex.

“Hydraulic fracturing can involve leakage of methane, toxic chemicals and radioactive material along fault lines into water – which could threaten all species of flora and fauna.”

Miranda Alderton, who is campaigning against possible fracking next door to her Wisborough Green home, said: “George Osborne must have let the heat get to his head halving the tax due from the drillers. Fracking is a nonstarter in this beautiful and crowded part of the country. Any politician who supports fracking in an area under threat is committing political suicide.

We would vote for The Raving Looney Party if it promised to stop the frackers.”