The government has thrown a critical £10bn rescue plan for Thames Water into doubt, pushing the UK’s biggest water company closer to temporary nationalisation. In a letter sent on Monday to Iain Coucher, chair of the regulator Ofwat, Environment Secretary Emma Reynolds objected to the proposal from the company’s lenders, saying it would place an “undue burden” on consumers and fail to protect the environment.
“Thames Water customers have been let down for far too long, with 15 years of underperformance, increasing serious pollution and customers left to pick up the bill,” Reynolds told reporters on Tuesday.
“Environment Secretary Emma Reynolds objects to Thames Water rescue plan, pushing the firm closer to temporary nationalisation.”
The rescue plan, put forward by a consortium called London & Valley Water (L&VW), would have seen creditors write off £9.4bn of the company’s near £20bn debt pile and inject new cash — including a £3.35bn equity injection and a £6.55bn debt facility — as part of a £10bn business plan to 2030. In return, L&VW wanted leniency from future pollution fines.
Speaking in the House of Commons, Reynolds listed “three particular concerns about the proposal: the unfair cost to customers, delays to vital infrastructure investments, and delays to environmental improvements”. She said she was “concerned that the long-term resilience of the water and wastewater systems may not be adequately protected”.
L&VW defended its plan, insisting it was “by far the fastest route to improve outcomes for customers and the environment, without any government funding or any cost to taxpayers”.
The objections mark the latest twist in a crisis that first emerged three years ago. Thames Water, which serves 16 million customers across London and parts of southern England, was hit by a record £122.7m fine in May last year for breaching rules on sewage spills and shareholder payouts. Since privatisation under Margaret Thatcher, successive private equity owners have loaded the company with £17.6bn of debt, leaving it close to collapse.
Reynolds’s Conservative shadow, Victoria Atkins, warned the government should be careful not to scare off potential investors. But pressure for public ownership is mounting. On Tuesday, 107 MPs — including 42 from Labour — signed an open letter to Ofwat and Reynolds calling for the company to be placed into a special administration regime, a form of temporary nationalisation. Earlier this month, Andy Burnham, the Labour candidate in the Makerfield byelection, said Thames Water should be nationalised, telling the Guardian that public ownership would “absolutely be an option”.
Reynolds said the government “stands ready for all eventualities”. Ofwat said it was reviewing her letter and the consortium’s plans. If the company does go bust, households will still have drinking water and sewerage services, but the question of who will pay for the investment needed to fix leaks and stop sewage spills remains unanswered.