Andy Burnham has yet to take the oath as prime minister, but a legal battle over the future of Britain’s biggest water company is already taking shape. The lenders to Thames Water have hired a top litigation firm and are preparing a multi-billion-pound legal challenge if the incoming PM follows through on his promise to nationalise the struggling utility.
Burnham, who becomes PM on Monday, has long argued for “greater public control” of the water and energy sectors and previously told the Guardian that this could mean nationalisation. His ally said that if the taxpayer must pay £2bn to keep Thames Water afloat, “the taxpayer needs to receive something in return; that means control”.
“Thames Water lenders prepare multibillion-pound legal battle if new PM Andy Burnham nationalises the utility.”
The company is drowning in debt – £21bn, of which a consortium of 100 institutional investors, London & Valley Water (L&VW), holds £17bn. They had proposed a rescue deal: write off £9.4bn of debt and inject £3.35bn of fresh cash, in exchange for leniency on future pollution fines. But the government rejected the plan as “weak” and bad for consumers and the environment. Environment secretary Emma Reynolds said in June she did not want customers to “pick up the bill for the company’s failures”.
Now, with nationalisation looming, the creditors are digging in. Sources close to them have told the BBC that in the event of full nationalisation, they would pursue payment in full of the outstanding debts, as has happened in previous cases – potentially leaving the government with a bill running into billions. The consortium has also moved to strengthen its legal position, hiring top litigation and disputes lawyers.
Mike McTighe, the corporate troubleshooter likely to become Thames Water’s chair if the rescue deal goes through, struck a more conciliatory tone. “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 he made clear that public ownership was not on the table.
The stakes could not be higher. On Thursday, Thames Water warned it has enough cash to last only until the end of this year. Labour’s deputy leader, Lucy Powell, was non-committal when asked whether a Burnham government would nationalise the company. “Let’s see,” she said, adding that “the privatisation of water hasn’t worked” and that the government already has powers to bring a distressed water company under special measures. As Burnham prepares to enter Downing Street, the question remains: will he pull the trigger – and can the country afford the fight that follows?
