SOUTHERN Water insists it cannot afford to cut customers' bills, despite having the biggest profit margin of any water company in the world.

Researchers commissioned by the

Transport and General Workers Union looked at water companies to compare profits and employment records.

The survey revealed Southern Water enjoys a profit margin of almost 60 per cent - ten times higher than French-based Vivendi, the largest water company in the world.

The company also had higher profit margins than similar firms across Asia, North Amerca and Europe, where profits included seven per cent in Hungary, 19 per cent in Sweden, and 2.4 per cent in France.

The news comes just two days before the water regulator Ofwat is expected to announce cuts in water bills averaging 14 per cent - worth an average of £35 for the typical household.

Southern Water said its high profit margin is necessary to pay for the massive maintenance and improvement programmes it is required to carry out, unlike its counterparts abroad.

Despite its huge profit margin, the company insisted it would have to reconsider all proposed investment projects for the next five years if it was forced to cut customers' bills.

This could affect such projects as Portobello, where the company is proposing a £60 million sewage treatment works at Telscombe Cliffs.

Jane Kelley, spokesman for Southern Water, defended its high profits and said the company was responsible for a long stretch of coastline and had to pay for increases in levels of sewage treatment.

She added: "We invest

two-thirds of our profits in our infrastructure and improvement programmes.

"We have already planned for the next five years on the basis of existing water

bills which pay for that investment.

"If we take a cut in income it will have an impact. We do not have profits to fall back on."

She added that water

companies in Europe did not face the same costs as those in Britain.

She added: "It's not fair to compare us to Europe where a lot of the infrastructure is franchised out so it is

taxpayers who pay for it, not the water companies."

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