The nation famed for its rainfall may soon take water from the sea

One of Britain's largest water companies is planning to build the country's first desalination plant, to turn large quantities of sea water into drinking water.

The pilot-scale plan will be large enough to supply a small town and would be sited on the Norfolk or Lincolnshire coastlines, which are among the driest parts of the country. Anglian Water yesterday put the cost at pounds 2m and said it would be financed from its innovation fund rather than from water bills.

There are still only few desalination plants in the world and two of the largest are in Saudi Arabia - which has abundant supplies of oil to generate the large quantities of electricity which conventional desalination processes require.

Anglian is interested because it wants to see how much the costs of desalination can be lowered by technological improvement and because it wants to keep its options open if the climate becomes permanently drier.

Corporate affairs manager Mike Keohane said: "Being in the driest part of England with the greatest resource problems we felt that, looking into the future, we need to know more about desalination than we do."

Anglian has purchased an American company, Fluid Systems, which works on the special membranes now seen as offering the best way forward for desalination.

Even with the drought now deepening in southern and eastern England it seems highly unlikely that desalination plants could be commercially viable here inside a decade.

More conventional measures, such as enlarging reservoirs or cutting wastage offer a much better return on investment.

But in the next century there may be a huge overseas market in dry, coastal nations with fast growing economies or even in Britain if dry years become a permanent fixture.

Anglian has not yet selected a site nor applied to a council for planning permission to build a pilot plant. "It's going to be rather bigger than a box on a beach," said Mr Keohane.

But he hopes for "a certain sympathy" from council planners who appreciated the looming problems of water shortages when an application was made.

Anglian is interested in reverse osmosis technology in which sea water is kept under pressure in a tank with a special membrane across it. Water minus the salt passes through and accumulates on the other side. But the saltier brine left behind is pumped back into the sea.

Another smaller water company, Folkestone and Dover, is considering investing in desalination as well. But this is because some ground-water sources in its part of eastern Kent have become increasingly saline due to old coalmining works which have allowed sea water from the nearby coast to penetrate.

Folkestone and Dover has also been looking at using the Channel tunnel to bring fresh water across from France using the structure's firefighting and cooling water-mains.