Thames Water rescue deal threatened by uncertainty over next prime minister | UK news
A rescue deal for Thames Water is under threat from a possible change in prime minister, government insiders have said.
Ministers are negotiating a takeover deal for the distressed water company with a consortium of creditors led by American investment firm Elliott Management.
But government sources said the deal, which some had expected to be finalized this month, had run into problems partly due to uncertainty over Keir Starmer’s position as prime minister.
Greater Manchester mayor Andy Burnham, Starmer’s likely successor, has talked about bringing utilities under public control, and his supporters have argued that if he enters Downing Street, he should start with Thames Water.
A senior source in the environment department said: “Things are changing every day; the situation is quite uncertain.”
They acknowledged uncertainty about who will be prime minister by the end of the year, but said they were unhappy with the details of the agreement being reported in the press. “We’re not really affected by things being leaked by creditors,” they said.
They added that there is currently “very little guidance” from the top of government.
A government spokesman said: “The government will always act in the national interest on these matters. The company will remain financially stable, but we are prepared for all possibilities, including resorting to a special management regime if necessary.”
Both Thames and the creditors group have been contacted for comment.
Thames has been trying to stave off financial collapse for more than two years after racking up a £17.6bn debt pile in the decades after it was privatised.
Bosses tried to sell the company last year but saw their preferred bidder KKR pull out of the deal at the last minute.
Creditors who provided the company with £3bn of emergency funding last year have demanded that tens of millions of pounds in fines imposed on the Thames for dumping sewage into waterways be erased. They also demanded a reduction in environmental investments by 2030.
Government sources until recently defended the proposed deal, arguing that it would cost £100bn to compensate private sector creditors and bring the deal under public control.
But experts have disputed that figure, arguing that ministers would be legally entitled to pay no compensation to creditors, given the company’s financial situation and how much profit they have already made.
If the deal collapses, the company will be transferred to special administration, a form of temporary nationalization. In this case, it will be up to the government to either sell the company to the highest bidder or place it under public control.
Burnham, who hopes to win the Makerfield by-election expected next month before challenging Starmer for the leadership, called on the government to be more willing to take utilities into public ownership.
Burnham said of Manchester buses, which he brought under public control on Saturday: “You have a £2 fare. So you take that principle and apply it to energy and water. I think that’s what we need to do.”
Many of Burnham’s supporters have called for Thames Water to be publicly owned. These include the think tank Compass, run by one of his closest allies, Neal Lawson, which is running a campaign calling for public ownership of the entire water industry.
Lena Swedlow, deputy director of Compass, said: “The reluctance to hand over Thames Water to private management is truly shortsighted and dangerous. It would just mean borrowing more to pay off existing debt.”
Earlier this month, Yuan Yang, one of the MPs who leads the Tribune group, was seen as close to Burnham. wrote an article called on the government to consider putting the Thames under special administration.
But Defra sources say they believe it will be difficult for a weakened Starmer or any Labor leader to allow the deal to go through, even if Burnham is not prime minister.
