Water companies say they need more money to fund improvements

The decision will allow the two water companies to increase charges from April 2004 to March 2005.

The average water and sewerage bill for United's customers - in September 2003 prices - will increase by around �21 to �273 next year, Ofwat said.

Northumbrian, which also operates in Essex and Suffolk, will see average bills rise by around �21 to �233.

The increases come after both companies asked for help to cover rising customer debt problems, as well as the cost of monitoring water standards.

Ofwat regrets

United said it was also facing rising construction costs, while Northumbrian said that falling water demand was an issue.

Ofwat director general Philip Fletcher said: "I regret the need for an increase, but I have a responsibility to ensure that prudent and well-managed water companies can finance the services they provide to customers."

He said: "The extra costs the two companies face are substantial enough to require an increase in bills."

Water companies across Britain have been pressuring Ofwat to allow them to raise prices to help pay for improvements to services.