The bug, which can lead to blood poisoning, is spreading in southern England and is more serious than Clostridium difficile, which hit the headlines last month after a virulent strain infected 15 hospitals.

The new superbug, an antibiotic-resistant strain of E.coli, put 357 people in hospital in the Southampton area in 2004, half of all those infected, and caused 29 deaths. It is still spreading through the community and attempts to control it have so far failed.

Details of the outbreak were contained in the annual report of Sir Liam Donaldson, the chief medical officer (CMO), published yesterday. The disclosure comes in the wake of growing concern about the hospital-acquired infections MRSA (methicillin-resistant Staphylococcus aureus) and C.difficile, which have caused many deaths throughout the NHS.

Last month, Patricia Hewitt, the Secretary of State for Health, ordered an inquiry into an outbreak of C.difficile at Stoke Mandeville hospital in Aylesbury, Buckinghamshire, that has infected 300 patients and caused 12 deaths since 2003.

Unlike MRSA and C.difficile, the E.coli bug is concentrated in people living in the community. Difficulties in containing the outbreak have been compounded by laboratories which have used inadequate methods to identify the infection.

An investigation into a single strain of the superbug - called extended- spectrum beta-lactamase (ESBL)-producing E.coli - found 998 cases were confirmed between 2003 when it was first recognised and early 2005.

Cases averaged five per month until May 2003, but then rose to a peak of 85 cases in November 2004. The investigation was carried out by the Health Protection Agency and Southampton University Hospital NHS Trust.

Most of those affected are elderly or have chronic diseases and weakened immune systems. In almost nine out of 10 cases, the bug causes a urinary infection, with one in 20 causing blood infections.

The CMO's report says that "treatment options" for the superbug are "very limited". "Death rates may be high, possibly related to treatment delays," it says. But the number of deaths had fallen "due to increasing awareness of the problem among clinicians".