Thames Water edges closer to nationalisation amid minister’s concerns over rescue deal
Thames Water is moving a step closer to nationalization after the environment secretary raised concerns about the proposed rescue plan.
Britain’s biggest water supplier, which serves 16 million customers, is on the verge of financial collapse as it struggles with debts of nearly £20bn since 2023.
Its creditors had proposed a deal involving £3.35bn of new equity capital and up to £6.55bn of new debt as part of their latest bid to save the company in March. But environment minister Emma Reynolds wrote to regulator Ofwat to share her concerns that customers would lose out in the deal. Times was first reported.
If an agreement cannot be reached between lenders and the regulator, Thames Water could enter into temporary expropriation through a process known as a special management regime (SAR). The plan will see the company operate through government-appointed operators for the duration of its sale.
In May last year, Ofwat fined Thames Water nearly £123 million for breaching rules on sewer leaks and payments to shareholders; This was the largest fine ever imposed by the water industry regulator.
Creditors are understood to be willing to write off £9.4bn of the company’s debt in return for immunity from future penalties.
But Ms Reynolds reportedly has shared concerns that the plan places an “undue” burden on taxpayers. He is thought to have raised concerns that creditors’ offer was “weak”.
He is expected to present his argument to parliament on Tuesday.
The government has repeatedly said it prefers a “market solution” over temporary expropriation.
Ms Reynolds said: “Thames Water customers have been let down for too long by 15 years of poor performance, increasingly serious pollution and customers are being forced to foot the bill.
“I have written to Ofwat to outline my initial views that I am not convinced the current proposal is good enough for consumers or the environment. We are prepared for any outcome.”
A Thames Water spokesperson said: “We remain of the view that a market-led solution is the best way to deliver the long-term stability required to continue to improve performance and progress our turnaround plan for the benefit of our customers, the environment and our stakeholders.
“We are undertaking our largest infrastructure upgrade in 150 years and our priorities continue to deliver safe, resilient services to our customers, support our colleagues and work closely with suppliers, government and regulators.”
Ofwat has also been approached for comment.
Ms Reynolds’s letter comes in a difficult week for Prime Minister Sir Keir Starmer, with Greater Manchester mayor Andy Burnham hoping to win the Makerfield by-election on Thursday, which would pave the way for him to launch a leadership challenge.
Mr Burnham recently signaled he could introduce a 10-year plan to renationalise the water industry and said reform was needed to put the public interest first.
