After all the water bill increases planned for next year, some homeowners will still risk a water shortage next summer, said Ofwat, the Office of Water Services this week.

And although there have been no hosepipe bans over the last few summers, said Ofwat, hosepipe bans could still threaten millions of homeowners across the country.

Water companies in England and Wales "still have more to do to reduce the risk of supply restrictions during prolonged dry periods," the report revealed.

The report shows, for example, that three companies in the south-east of England, Southern Water, Folkestone and Dover Water and Thames Water, need to invest heavily to ensure the continuing reliability of future supplies.

New leakage targets for the next five years means that water companies in England and Wales will have to reduce total water losses by more than 300 million litres a day - enough to supply the average daily needs of two million people.

The price limits recently announced by Ofwat will enable water companies who face these problems to carry out a substantial programme of investment of nearly £1.3 billion to safeguard future water supplies. Ofwat expects that by 2010 the deficits between the amount of water that companies have available to supply and their expected needs will be largely eliminated.

The biggest cut in leakage of 180 megalitres (million litres) a day - around 20 per cent of its current water losses - will be made by Thames Water. Achieving this target will bring its performance into line with the rest of the industry.

However, Ofwat's Bill Emery, chief engineer and director of costs and performance, said: "The water companies have made great strides over the last decade in reducing water losses and the majority are meeting their economic leakage targets."