David takes on Goliath in Westbourne Grove

Less than a year ago it was a blissful haven for independent traders. Glossy boutiques, organic delis, bespoke jewellers and exotic restaurants jostled for space on the tree-lined boulevard where shoppers enjoyed the individuality of the small shops and cafés.

Now it sits in a thick layer of cement dust and grime. Ugly hoardings encase the road, hiding the shop fronts from passing custom and creating a maze of dismal alleyways. Stores and cafés that once attracted famous locals are decaying. Most have seen their takings fall as much as 75 per cent. Some are on the brink of closing. Four have shut already.

This is Westbourne Grove in Notting Hill. These days it looks less a shopper's paradise and more a building site. It has been four months since Thames Water marched in with diggers, drills and plans to replace 500 metres of Victorian water mains. The £6.5 million scheme followed complaints from residents whose basements were left full of raw sewage and filthy rainwater following a downpour.

The company promised to support local businesses throughout the upheaval, offering compensation to any who could prove the work had had a detrimental effect on sales. Instead, say shopkeepers, their concerns have been ignored and their stores left to suffer as footfall drops by the day.

Ishrat Khaku, who runs a small optician's that has been going for 23 years, is one of those badly affected. She campaigned alongside local residents to get Thames Water to start work. Now she wishes she had kept quiet.

"Every year rainfall would overflow the drains and spill out on to the street, filling up basements and causing thousands of pounds worth of damage," she says. "We were all worried about flooding and none of us could get insurance. In retrospect, I think it would be better to be flooded once a year and deal with that cost than suffer month upon month of bad takings. The solution seems to be worse than the problem itself. Some businesses have reached crisis point and just cannot continue to meet the rent costs and business rates as well as retain staff."

Floods have hit the area three times in the past six years, the last time in July.

The affluent street - close to Portobello Road - has seen the steepest increase in rents in Britain over the past decade. But even the exorbitant costs, crippling rates, aggressive parking controls and march of supermarket giants have failed to kill the roaring trade - until now.

Sharafedin Shalabi, manager of Finelines Furniture, pays £55,000 in rates and £22,000 rent. "This is an exclusive street which attracts rich customers so you expect to pay top-end rates and rents," he says. "This is all very well if you are making money but now the builders have moved in we are making a loss."

When Thames Water, which has been labelled the leakiest water supplier in the UK, decided to carry out the repairs, it held a number of consultations with residents and shop owners to discuss the implications of the labour.

The company, which is digging up 580 roads around London as part of its £1 billion five-year project to repair ageing pipes, promised "complete transparency" during the eight-month work programme.

Joy Wright, marketing manager for Khan's Indian Restaurant, which has been in business for 30 years, says the firm also mentioned a compensation scheme to help businesses that lost money.

"Thames Water promised to be helpful, to allow deliveries to reach shops and to warn us if they were going to switch off the water. They agreed to put up advertising signs on their hoardings to say shops were still open for business.

They also said they would keep us up to date with the work schedule and offer us all compensation for loss of earnings. None of this has been done.

"When we ring the company for advice they pass us from pillar to post. Some of their employees have told us the compensation scheme doesn't even exist and that we misinterpreted the promises that were made. They are a multi-million-pound giant and we are just a bunch of small shops. It's David versus Goliath."

Khan's has seen a 70 per cent drop in takings since work started in January. "It has crucified business and we do not know what the long-term effect will be," says Wright. "Some shops in this area will never recover and it feels like the character of this community has already been obliterated."

During the consultation process, Thames Water chief executive David Owens wrote an article on the planned works in a newsletter to local residents.

He said: "I strongly realise that this major construction project will have a big impact on other people in the area while the work is going on. Thames Water has done its utmost to communicate and consult with local residents, businesses, the city council and your elected representatives and we shall continue to do so." Mustapha Boudhaoui, who helps brother Youssef at the Andalucia Delicatessen, says his business is on the brink of collapse and Thames Water did not want to know.

"We will be forced to shut down if we cannot recover from the financial blow of the water work," he said. "We have already had to lay off four members of staff and shut our sandwich bar. The hoardings outside the shop make the street feel dark and unwelcoming and it is putting people off. Some days we only see one or two people walk past. We have tried to communicate these issues to Thames Water, who have pretty much said it is our problem and not theirs."

John Zamit, chairman of the South East Bayswater Residents Association, says he is particularly concerned about the long-term implications on the character of the street. He says café Natural and nail bar Urban Therapy have already shut down, as well as restaurant Shish and the local post office.

"Premises are virtually impossible to let at the moment. I'm not sure businesses knew how much this was going to hurt."

William Kennedy, co-chairman of the Queensway Resident Association, has joined Mr Zamit to help champion the small shops during the crisis.

He says the noise and inconvenience had been "seriously underestimated" by Thames Water and that the area, which previously attracted celebrities such as Hugh Grant and Kate Moss and local resident Conservative leader David Cameron, is now struggling to entice even the odd passer-by.

"The street just looks miserable," he adds. "It is unattractive and dismal and shoppers feel unsafe and unwelcome. Businesses are being trampled on and there has been a complete lack of consideration.

"It's all very well talking compensation but if you lose valuable customers, no amount of compensation will bring them back. They will have moved on and found a new deli, a new pub, a new restaurant." Even the workmen from Barhale, a contractor commissioned by Thames Water to carry out the work, admit a scheme of this size will have lasting consequences.

One, who does not wish to be named, says: "I feel really sorry for the shops. Work on this scale is noisy and dirty and if I was a shopper I wouldn't want to come down here to get my groceries - they would all be caked in dust.

"We are not even sure we are going to finish on time but Thames Water don't want to rock the boat. They have managed to keep all the problems under the radar so far but they are getting complaints on a daily basis."

The engineers are supposed to have the job done by the Notting Hill Carnival on the August bank holiday. A spokesman for Thames Water says: "We recognise that the flood alleviation works have caused disruption for many people using or passing through the area.

"However, we firmly believe the longterm flooding protection offered by the project will far outweigh the temporary inconvenience caused during the construction period.

"We would like to assure our customers that we will discuss with them the level of disruption to their businesses and that where compensation is due, it will be paid. The project is proceeding on target."