This is support which SCDI asked for and it is very welcome in the current economic climate.

For businesses, decisions on their water bills over the next five years are due from the Water Industry Commission for Scotland (WICS) next month. With economic recovery expected to be slow and protracted, and energy bills projected to increase by up to 60 per cent in the next 10 years, provision of high-quality, yet affordable, water services is a priority.

With Scottish Water reducing its operating costs by 40 per cent since 2002 and action to end the £44 million cross-subsidisation from non-domestic to domestic water customers, SCDI believes that this is achievable. We are therefore calling for real terms falls in charges.

There is now a competitive market for non-household customers and this should further "compete away" margins. Private sector providers have greater financial incentives to offer water efficiency advice and innovations such as single online bills for multi-site users and demand management which are good for the environment and save money.

Enabling sustainable economic growth also requires substantial funding for maintenance and enhancement of infrastructure in locations where the private and/or public sector wants to invest, such as the A96 corridor. Scottish Water has been addressing a legacy of underinvestment and has reduced development constraints which were a major cause of frustration, but SCDI does still hear examples in the Highlands of delays. Sufficient investment needs to be made available and developers cannot be expected to meet the full costs of new capacity when the commercial viability of projects is under severe pressure.

This will also support the civil engineering industry, which has suffered a 15 per cent fall in both total turnover and employment and is especially important to the Highland economy. Investment needs to be programmed to provide stability and certainty in its workloads, which can fluctuate greatly, especially in the transitions between regulatory periods. SCDI has argued for lengthening of the regulatory period which the WICS is now supporting. But we are concerned that its other proposals will not smooth the investment profile and this may cause difficulties for the civil engineering industry next year and in the future.

There is a bigger question-mark over these proposals which ministers must also address. Their success is based on increased customer numbers and revenue for Scottish Water and on Scottish Government support. The former depends on economic growth and the latter depends on the allocation of £700 million of scarce Scottish Government funding.

At some point this may no longer be financially sustainable, and consumers and businesses cannot be expected to stump up the difference. Sustainable economic growth will require investment in water services and new funding sources will have to be found.

SCDI has made representations to the WICS on all these points and awaits its decisions.

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