THAMES Water has been told its "unacceptable" leaky pipes are partly to blame for the hosepipe ban.

Figures released by the company on Wednesday showed it had failed to meet its leakage targets for the third year running despite announcing £346.5m pre-tax profits.

The news comes as an Oxfordshire County Council report on water supply called on Thames Water to reconsider a possibility of creating a massive new reservoir.

The report says that Thames Water is expected to come forward some time this year with formal proposals for a reservoir at Steventon, costing an estimated £1bn.

But it says that even at this late stage, Thames Water should urgently look at other options, including ways to make use of millions of litres of untapped flood-plain water, treating waste water, looking at ways to reduce water consumption and reducing leakages, which see the company lose the equivalent of more than two Olympic-sized swimming pools every day of the year.

One of the report's authors, Sushila Dhall, said: "The cost of the reservoir will be many millions more than the cost of repairing leaks."

An Ofwat spokesman said: "Customers are paying the higher prices that Thames Water has been allowed to charge, without getting all the benefits that the company has promised to deliver.

"This is unacceptable."

Thames Water chief executive Jeremy Pelczer said: "It is immensely frustrating that despite our strenuous efforts to reduce leakage we have missed our target."

In the past 12 months, Thames Water fixed 87,000 leaks, an increase of 20 per cent on the previous year.