One of the UK's largest water suppliers is leaking enough water to supply 2.5 million people every day, a report has revealed.

Industry watchdog OFWAT has raised concerns over Thames Water, which accounts for one quarter of the total leakage of the 22 water companies in the UK.

The company was said to "leak" more than 860 mega-litres per day, enough water to supply the entire population of Greater Manchester daily.

The company has responded by saying that a major pipe replacement scheme is underway.

Worst offender

The report identifies Thames Water as the "main cause" for a five per cent leakage increase for the industry as a whole.

John Sexton, managing director of Thames Water Utilities, said: "We share Ofwat's concern at the high level of leakage in our region. We take this issue very seriously, and are determined to resolve the problem."

Regional director of the Environment Agency, Chris Birks, described the increasing level of leakage as alarming.

"Urgent action is required to address the unacceptably high levels of leakage within the Thames supply area," he added.

"Although corrective measures have been put in place, it is alarming that leakage continues to rise.

"This raises concerns regarding the ability of Thames Water to meet its standards of sevice to customers during extensive drought periods without compromising the environment."