The government has formally objected to a £10bn rescue package for Thames Water, taking Britain’s largest water company a step closer to temporary nationalisation. Environment Secretary Emma Reynolds wrote to industry regulator Ofwat on Monday to raise concerns over the proposal put forward by the firm’s lenders, London & Valley Water. A government spokesman told the BBC the current offer “does not do enough to protect consumers or the environment”.
Under the proposed deal, a consortium of large financial institutions and investors would write off £9.4bn of Thames Water’s near £20bn debt pile and inject billions in fresh cash. The plan includes £3.35bn in new equity and a £6.55bn debt facility, forming a £10bn business plan to run until 2030. In return, the lenders have sought leniency from future pollution fines. A spokesman for the group previously said the rescue would “fund significant improvements for customers, clean up local rivers and achieve full compliance as quickly as possible”.
“Government blocks £10bn Thames Water rescue deal, increasing likelihood of temporary nationalisation.”
Thames Water, which serves about 16 million customers across London and parts of southern England, has faced mounting criticism over sewage discharges, pipe leaks and overall performance. In May last year, it was handed a record £122.7m fine — the largest ever imposed by Ofwat — for breaching rules on sewage spills and shareholder payouts.
The government’s intervention, first reported by The Times, centres on fears the deal would place an “undue burden” on customers. Reynolds is due to address Parliament on Tuesday. Without an agreed rescue, Thames Water is expected to run out of cash within months and could collapse. Ofwat has been reviewing the proposal and a decision is due this summer.
The government has repeatedly said it prefers “a market-based solution” but would step in “if that were to become necessary”. The form of temporary nationalisation on the table — known as a special administration regime (SAR) — would keep the company running under government-appointed managers. Households would continue to receive drinking water and sewerage services.
But a spokesperson for Thames Water has warned that a SAR would “delay urgently needed improvements, increase costs, transfer risk and potentially create operational disruption”. The company and Ofwat have been contacted for comment on the latest developments. The coming weeks will determine whether the utility falls into state hands or whether a last-minute alternative emerges.