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First water investment fall for three years

INVESTMENT IN the water sector has fallen for the first time since 1996, according to the industry regulator Ofwat.

Capital investment in water and sewerage infrastructure fell by 3% to £3.7bn in the year to March 1999 according to Ofwat's financial performance and expenditure report, released this week. The decline was driven by a steep fall in the construction of new facilities for water supply, which dropped 14% to £1.3bn.

In contrast, expenditure on sewerage infrastructure, including renewals, rose 4% to £2.1bn.

Ofwat claimed that the drop in investment was because 'the expenditure programmes to improve security of supply that began in 1996-97 have been completed'. However, the report also points to 'greater efficiencies' in capital programmes which have produced savings of 'over 15% for the 1995-2000 period'.

The Ofwat report claims these savings will be passed on to customers, a controversial point with water companies who question the Regulators' calculations (NCE 7 January).

When expenditure is analysed by purpose, the report reveals that the maintenance of surface assets and work to balance supply and demand declined most in 1998/99, falling by 11% and 13% respectively.

The biggest increases were in the maintenance of underground assets (8%) and quality enhancement programmes (6%).

The report records that 'difficulties' being faced by water companies in acquiring land and planning permission for 'a number of large coastal sewerage treatment schemes' were continuing, particularly in the Southern Water region. According to the report 'this will almost certainly mean that deadlines will be breached'.

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