CAPITAL investment levels in the water industry continued a record levels last year, reports water watchdog Ofwat.

The report of financial performance and expenditure of the water companies in England and Wales, issued by Ofwat yesterday, reveals that industry operating costs fell in real terms. Many water and sewerage companies are continuing to show that they can become more efficient - and maintain services to customers.

Sir Ian Byatt, Director Genral of Water Services, said: "As a result of the companies' efficiency improvements, bills have come down in April 2000, following the new price limits I set last November."

The report sets out how money has been invested and where the finance for the large capital investment programme comes from. It also compares company performance with the Director General's assumptions when price limits were set in 1994 for the period April 1995 - March 2000.

"The water industry is serving its customers and the environment well," said Sir Ian.

Capital investment has remained at a high level in 1999-2000, totalling £3.6bn for the year. This is higher than the average annual investment since privatisation, and far higher than before privatisation.

Other key points :

lThe trend in operating costs has been down in the last five years.

lCompanies' spending exceeds income by £1.5bn. this shortfall has been met by borrowing. Net borrowing as of March 31 this year amounted to £12.2bn.

lThe Water companies have continued to improve the quality of their drinking water over the years.