Small business leaders in Sussex have urged an industry watchdog to stop water companies imposing excessive increases in bills.

Southern Water wants to increase its bills by 45 per cent, more than any other company in the UK while South East Water is planning a 29 per cent hike.

The Federation of Small Businesses (FSB) yesterday told Ofwat the price increases could have a destabilising influence on thousands of smaller firms.

It warned farms, guest houses, launderettes and other small firms faced an average of £1,160 extra a year under the proposed increases.

The water companies said the extra revenue was needed in the next five years to replace ageing pipes, improve water quality and comply with environmental laws.

But FSB environment chairman John Holbrow said: "Although as a percentage of annual turnover these amounts may not be huge, the massive price hikes will still be difficult to stomach.

"Small firms need to carefully budget their outgoings and rely on predictable and stable utility services.

"Moreover there are large numbers of small firms, such as launderettes, farmers and restaurants that are high users of water, yet do not have access to the block tariffs afforded to big companies."

Roger Marlowe, owner of Paskins Hotel and chairman of Brighton and Hove Hotels' Association, said the increases were another blow for small firms in the region.

He said: "The Government always tells us it has to control spending but privatisation was really about passing the buck. Now it should be looking to control these huge monopolies.

"We have a reckless attitude to water in this country when elsewhere it is a precious commodity so perhaps we should value it more. But for an average small hotelier with a turnover of between £100,000 and £150,000 these increases are huge. They follow big rates increases as well."

Worthing-based Southern Water plans to invest £2 billion to maintain and improve services over the next five years. The work includes new and improved water supply works, water mains, wastewater treatment works, pumping stations and sewers.

When the company submitted its business plan to Ofwat earlier this year, managing director Stuart Derwent said charges would have to rise to meet the cost of investment.

Margaret Devlin, managing director of South East Water, based in Haywards Heath, has defended her company's proposed increase, which is in line with the national average.

The firm's five-year business plan includes reducing leaks, refurbishing 20 treatment plants and improving water quality.

She said: "There are a lot of operating costs driving the increases including changes in taxation, higher business rates and issues surrounding company pensions.

"Investment is just a part of the business plan. Where European directives have come in that has an effect but about 50 per cent of the increases will be on maintenance of assets."

Ofwat is expected to give its views on the proposed increases later this week.

The regulator will set water charges for 2005/10 in December.

Tuesday August 03, 2004