Incoming prime minister Andy Burnham is reportedly planning to put Thames Water into a special form of administration as he pledged to take greater “public control” of Britain’s utilities.
Britain’s biggest water firm – which has been left on the brink of nationalisation as it struggles under a £20bn debt pile – is facing being put into a special administration regime (SAR) that would allow essential services to keep running until a buyer is found.
Thames Water has warned it will run out of money by the end of 2026 if a deal is not found with its creditors and the government.
The Sunday Times reported that an emergency SAR is being considered, a plan which would risk leaving the taxpayer liable for the £2bn that the company estimates it needs to keep running until the end of 2027.
Thames Water’s chief executive Chris Weston told the newspaper: “If they put us into a SAR, the government would have to fund us for the period of time that we were in the SAR.”
Meanwhile, an ally of Mr Burnham said: “If it is going to cost the taxpayer £2bn to keep the company afloat, then the taxpayer needs to receive something in return – that means control, so that we can fix the company and secure the water supply for thousands of families and businesses.”
There is currently no precedent for a water company being put into an SAR. However, energy supplier Bulb was put into a similar set of measures in 2021 before its assets were sold to Octopus Energy. It was forced to repay £3bn to the government as part of a pledge to return the taxpayers’ funds it received for rescuing the firm.
Mr Weston has called for urgent clarity from Mr Burnham over his plans for the sector as he revealed the stricken utility could run out of cash within months unless a funding deal is struck.
Mr Burnham, who is expected to be appointed prime minister on Monday, has signalled he wants to bring in a 10-year plan to renationalise the water industry, saying reform is needed to put the public interest first, leaving a question mark over plans for Britain’s biggest water supplier.
Last month, he clarified that he would not advocate for immediate, full renationalisation due to its complexity and expense, instead suggesting a staggered implementation.
Speaking to reporters in Makerfield in June, Mr Burnham stated his belief that the water “industry is broken”.
He said: “It’s not an industry that’s run in the public interest, and you know these are, as I say, industries run with the private vested interest, but the public have no choice but to use them, and therefore they’re trapped, and it’s just not fair.
“That’s why we need substantial reform and it is about a 10-year plan of more public control, more public ownership.
“I don’t think you nationalise the whole thing necessarily straight off, because that’s complicated and probably expensive, but you look at the different situations in different parts of the country.
“Thames Water, I would say there’s a very strong case for public ownership to sort out its problems.
“But elsewhere … then you know there can be a different timetable for changes in other parts of the country. You’ve got to do it in a way that can be managed financially, but gets us to a water industry that puts the public interest rather than the private interest first.”
Creditors have already been sent back to the drawing board and are battling to secure a rescue deal for the water supplier after environment secretary Emma Reynolds last month warned she did not believe their £10bn plan for Thames Water goes far enough to protect customers or the environment.
Ofwat was reportedly close to accepting an offer from the London & Valley Water consortium, which proposed injecting £10bn into the debt-laden company in return for a four-year waiver on any new fines over sewage leaks.
Mr Weston said the group is in discussions with creditors about extending funding into 2027 to allow more time for the deal, but said clarity from government is needed, and “the sooner the better”.
He said: “The big unknown is what the new prime minister wants to do when he comes in. We’ve had no conversations with him and it would be better to know what he’s thinking.”
The UK’s biggest water supplier, serving 16 million customers across London and the South East, reported pre-tax profits of £226.4m for the year to 31 March, a marked improvement from last year’s £1.65bn loss.
However, full-year results showed debts swelled to £19.77bn, up from £17.73bn, as the group continued to draw down funds for capital investment.
A Thames Water spokesperson said: “We continue to work with all parties to reach an agreement that supports Thames Water’s long-term financial stability and ensures the uninterrupted delivery of our biggest infrastructure upgrade in 150 years while continuing to meet the needs of our 16 million customers.”
Mr Burnham’s office declined to comment further.
