Small businesses could be caught out by the rapid increases in water bills sanctioned by Ofwat yesterday, the Federation of Small Businesses (FSB) has warned.
The FSB said that the industry watchdog was correct to reject the large price rises demanded by the water companies, but said that many small firms will face significant extra costs next year.
Ofwat ruled that water companies could charge customers an extra 13 per cent over the next five years to fund improvements to pipes and improve water quality.
The water suppliers were hoping to secure average price rises of 29 per cent, but this was rejected by Ofwat.
However, average water bills are set to rise by 7.6 per cent in 2005, with Welsh Water, Severn Trent, South West Water and Thames Water permitted to increase prices by over 10 per cent.
The FSB said that the dramatic increases will catch small businesses by surprise, and urged Ofwat to ensure that price hikes were no higher than necessary to update the water system.
John Holbrow, of the FSB, said that 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,” he said.