HousesHomeServe is to cut 200 jobs after admitting it was taking longer than expected to recover from accusations that it mis-sold policies.

The firm, which last year insured three million people in the UK against burst pipes, broken down boilers and electrical problems, stopped making outbound sales calls in October and retrained staff after a review into whether its pricing policies were clear.

It has still not started making sales calls, while it has gradually resumed inbound calls, having received approval from all but one of the water firms it works with. The company restarted sending mail to households last month.

With it taking longer than thought to resume marketing activities, it said customer numbers could be down as much as 8% - or 240,000 - in the year to the end of March. It had previously said it expected a 5% fall.

As a result, it is consulting on reducing its UK headcount by 200 - about 7% of its full-time workforce in the UK. It is understood that all of the proposed jobs will go from its head office in Walsall. Sites in Banbury in Oxfordshire, Preston and London are expected to be unaffected.

Shares have fallen 10%, meaning the group's value has nearly halved since the problems hit.

Andy Brown, an analyst at Panmure Gordon, said that although the company has been working hard to rebuild confidence, there is still a possibility of an investigation - and potential fine - by the Financial Services Authority.

The proposed job losses will help double its reorganisation and redundancy costs this year to £20 million. And there was further bad news for investors, after it said the customer retention rate had been slightly lower than expected after it suspended staff incentives in a call centre.

The company, which was founded in 1993 by chief executive Richard Harpin as a joint-venture with South Staffordshire Water, said full-year pre-tax profits will still meet City expectations as it makes good progress overseas.

Mr Brown did not revise downwards his forecasts for profits to rise 6% to £124 million but warned that uncertainties remain despite the group's efforts to rebuild itself.