Southern Water is to compensate businesses and community groups after thousands were left without water in East Sussex for five days.

The outage, which coincided with the May Day Bank Holiday weekend, affected 32,500 properties in Hastings and St Leonards.

At the time, East Sussex County Councillor Godfrey Daniel said it would have a “huge impact” at what was normally a busy time for hotels, pubs and restaurants, and as businesses struggled with the cost of living.

Southern Water’s director of water Tim McMahon said he hoped the £1m compensation fund would “make a positive difference”.

The water outage happened as the annual Jack in the Green Festival and May Day Bike Run were being held, events which attract thousands of visitors.

Families turned to bottled water supplies, with some collecting rain water, and one hotel in Hastings was flushing toilets with sea water, after a pipe burst in isolated woodland.

Mr Daniel had called on Southern Water to acknowledge the issues in people’s water bills.

Earlier this week, the Consumer Council for Water (CCW) watchdog revealed water companies in England and Wales wanted bills to increase between 24% and 91% over the next five years – with Southern Water asking for the biggest jump of 91%,

Mr McMahon said: “We recognise that the services we provide have not met all of the expectations of our customers in St Leonards and Hastings in recent months – and we are very sorry.

“This community has faced both weather-related floods and a major loss of water supply, and we have seen the toll this has taken on local businesses and households. We accept that we need to put things right.”

The cash includes £120,000 for festivals and events, £500,000 for community projects and £380,000 for businesses.

The company said that all eligible businesses will be contacted directly and the company will be in contact with community recipients in the coming weeks.