The lenders to Thames Water are plotting a multibillion-pound legal challenge if Andy Burnham’s new government attempts to nationalise Britain’s biggest water company, sources have told the BBC.
Burnham, who becomes prime minister on Monday, has called for “greater public control” of the water and energy sectors and said last month that Thames Water should be nationalised. The prospect has prompted London & Valley Water (L&VW), a consortium of 100 institutional investors holding £17bn of the company’s £21bn debt, to hire a top litigation firm and prepare to pursue payment in full of the outstanding debts — a move that could leave the taxpayer with a multi-billion-pound bill.
“Thames Water creditors prepare legal battle if Burnham nationalises the firm, risking billions in taxpayer costs.”
L&VW had previously proposed a rescue deal: write off £9.4bn of Thames Water’s near £20bn debt pile and inject £3.35bn of cash, in return for leniency from future pollution fines. But the government rejected the plan as “weak” and bad for consumers and the environment. Emma Reynolds, the outgoing business secretary, said in June she did not want Thames Water customers to “pick up the bill for the company’s failures”.
Burnham’s allies have suggested he could place the company into a special administration regime (SAR), a form of temporary public ownership. One Burnham ally told The Sunday Times: “If it is going to cost the taxpayer £2bn to keep the company afloat then the taxpayer needs to receive something in return; that means control.”
Despite the legal preparations, Mike McTighe, the corporate troubleshooter leading the governance overhaul proposed for Thames, said the consortium wanted to work constructively with the new government. “We are keen to meet new ministers as soon as possible to discuss how we can work together in the best interests of customers, including by enhancing public control of the company’s operations,” he said. But McTighe made clear that L&VW does not support public ownership.
Labour’s deputy leader, Lucy Powell, struck a cautious note when asked on Sky News whether a Burnham government would nationalise Thames Water. “Let’s see,” she said. “The government has powers to bring a distressed water company under special measures, and let’s see if the government needs to, wants to use those powers.” She added that “the privatisation of water hasn’t worked”, pointing to rising bills and a lack of investment.
The Department for Environment, Food and Rural Affairs said it was “prepared for any eventuality”. A spokesperson added: “Thames Water customers have been let down for far too long.” With the company warning it has enough cash only until the end of this year, the clock is ticking for Burnham and the creditors to strike a deal — or face a courtroom battle that could cost billions.