Planned increases in water prices would hit small firms and should be abandoned, according to the Federation of Small Businesses (FSB).

Water companies have proposed an average 29 per cent rise in charges over the next five years, with some providers wanting to up prices by 45 per cent.

The companies have tabled the plans to the government’s water regulator, Ofwat, claiming that they need the extra income to update aging pipes, improve water quality and comply with environmental legislation.

The director general of water services, Philip Fletcher, will announce whether the price increases have got the green light on Thursday.

The FSB has urged Fletcher to not approve such large rises, insisting that small firms would be flooded with extra costs.

John Holbrow, of the FSB, 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 laundrettes, farmers and restaurants that are high users of water, yet do not have access to the block tariffs afforded to large companies.

“When Ofwat announced the proposed price increases in May it said that although increases were inevitable, it would ensure that price limits were no higher than necessary to update aging infrastructure.

“The FSB is now calling on the regulator to stay true to its word and stop excessive increases.”