Six months before it is set to run out of money, Thames Water has been pushed a step closer to temporary public ownership after the environment secretary formally objected to a £10bn rescue package proposed by its lenders.
Emma Reynolds wrote to the industry regulator Ofwat on Monday raising three specific concerns: the unfair cost to customers, delays to vital infrastructure investments, and delays to environmental improvements. “There is an expectation in the proposal for customers to fund and therefore bear an undue cost for investment in the company,” she told reporters, adding that she was “not convinced about the proposal’s request to reduce performance standards”.
“Government objects to Thames Water's £10bn rescue deal, pushing it closer to temporary nationalisation.”
The objections strike at the heart of the creditors’ plan. A group of existing lenders had offered to write off £9.4bn of Thames’s near £20bn debt pile and inject billions in new money—but wanted leniency from future pollution fines in return. The consortium, London & Valley Water, said it would put in £3.35bn of cash and a new £6.55bn debt facility as part of a £10bn business plan to 2030. A spokesperson insisted the plan was “by far the fastest route to improve outcomes for customers and the environment, without any government funding”.
But Reynolds, speaking in the House of Commons, said she was “concerned that the long-term resilience of the water and wastewater systems may not be adequately protected”. The government, she said, “stands ready for all eventualities”, including temporary nationalisation.
Thames Water, which serves 16 million customers across London and parts of southern England, has been under intense scrutiny for years. It was hit with a record £122.7m fine in May last year for breaching rules on sewage spills and shareholder payouts. Fears of its collapse first emerged three years ago, and its shareholders walked away two years ago. Creditors opened talks with Ofwat 18 months ago.
Now, with the company expected to run out of money in October and a possible “going concern” qualification in its accounts next month, the political mood appears to be shifting firmly towards special administration. That process would allow anyone to make an offer while the state temporarily funds the company. Andy Burnham, who could soon be prime minister, said last week that public ownership was “what should be done” at Thames.
Reynolds said she did not want customers to “pick up the bill for the company’s failures”. If Thames Water does go bust, households will still have drinking water and sewerage services. But the question of who ultimately pays—and how much—remains unresolved.