The UK government has formally objected to a £10bn rescue plan for Thames Water, pushing the country's largest water company a step closer to temporary nationalisation. Environment Secretary Emma Reynolds wrote to Ofwat chair Iain Coucher on Monday, warning that the proposal would place an “undue burden” on consumers and fail to protect the environment.
Thames Water, which serves 16 million people across London and southern England, has been under intense scrutiny for years. In May last year, it was handed a record £122.7m fine by Ofwat for breaching rules on sewage spills and shareholder payouts. The company now carries £17.6bn of debt, much of it loaded on by successive private equity owners since its privatisation under Margaret Thatcher.
“Government objects to Thames Water rescue, citing unfair costs to customers, pushing firm towards temporary nationalisation.”
The proposed rescue, put forward by a consortium of lenders calling itself London & Valley Water (L&VW), would have seen £3.35bn of new cash injected along with a £6.55bn debt facility, as part of a £10bn business plan to 2030. Creditors offered to write off £9.4bn of debt, but in return demanded leniency from future pollution fines and a relaxation of performance standards.
Reynolds told the House of Commons she had “three particular concerns about the proposal: the unfair cost to customers, delays to vital infrastructure investments, and delays to environmental improvements.” She added: “There is an expectation in the proposal for customers to fund and therefore bear an undue cost for investment in the company.” The environment secretary said she was “concerned that the long-term resilience of the water and wastewater systems may not be adequately protected.”
Reacting to the intervention, a spokesperson for L&VW insisted their plan was “by far the fastest route to improve outcomes for customers and the environment, without any government funding or any cost to taxpayers.” Ofwat said it was reviewing the consortium’s proposals and Reynolds’ letter.
Political pressure is mounting. A group of 107 MPs, including 42 from Labour, signed an open letter urging Ofwat and Reynolds to reject the deal and instead place Thames Water into a special administration regime – a form of temporary nationalisation. Earlier this month, Andy Burnham, the Labour mayoral candidate, said Thames Water should be nationalised, calling public ownership “absolutely an option”.
Reynolds told reporters the government “stands ready for all eventualities”, including temporary nationalisation. Her Conservative shadow, Victoria Atkins, cautioned against scaring off investors. If the company does collapse, households will still receive drinking water and sewerage services – but the question of who pays for its recovery remains unresolved.