Thames Water should be temporarily placed under public ownership, MPs warn
Move would be ‘cost neutral’ for the Treasury while protecting 16mn customers served by UK utility, cross-party parliamentary committee says
Thames Water should be placed into temporary state ownership and current takeover talks with its creditors halted immediately, a cross-party parliamentary committee has urged.
The Environment, Food and Rural Affairs (EFRA) Committee said that it did not believe the “opaque consortium” of more than 100 hedge funds and other lenders that in effect control the company had the public interest or the environment at heart.
Ministers should immediately trigger the Special Administration Regime (SAR), a form of temporary nationalisation, the committee said. It argued the move would be “cost neutral” for the Treasury while protecting the 16mn customers served by the UK’s largest water utility.
“We believe Thames Water can be turned around, but not by giving the keys back to the people who have been joyriding in the family car,” said Alistair Carmichael, the Liberal Democrat MP who chairs the committee.
The damning report will pile pressure on Andy Burnham, with the decision on what to do with Thames Water a key test of his premiership.
The MPs said they struggled to understand why the government had not already intervened and urged swift action, including emergency legislation if needed.
Thames Water has been in the hands of its senior creditors — operating under the name London & Valley Water (L&VW) consortium — since its previous shareholders walked away in 2024, branding the company “uninvestable”.
Saddled with £20bn in debt, Thames Water is being propped up by a highly expensive emergency loan carrying a near 10 per cent interest rate. Despite sharp increases in bills, the company is set to run out of cash by Christmas unless the government agrees a new deal with the creditors or takes it into the SAR.
L&VW includes prominent US distressed-debt specialists Elliott Management and Silver Point Capital, but there has not been sufficient public transparency over its membership and the MPs expressed “serious concerns” over “their suitability as owners of a critical resource”.
An investigation by the FT earlier this week revealed that Thames Water has incurred almost £2bn in financing costs and advisory fees over the 18 months to the end of September, adding to concerns about the supplier remaining in private hands.
The Efra committee accused the senior lenders of “keeping the company in limbo” to draw out negotiations while “simultaneously reaping millions in debt interest and fees”. It pointed out that investors were trading the debt on the expensive £3bn loan at 112 per cent of face value even before the deal was finalised.
Given the short-term interests of the creditors, the MPs concluded that the consortium is highly unlikely to deliver the “swift turnaround in performance” that the network requires.
The lenders have spent over a year negotiating a formal takeover plan with Ofwat, the water regulator. However, the creditors’ proposal includes a cap on financial penalties for sewage pollution and other operational offences, which MPs said should be rejected.
The MPs also questioned Thames Water’s ownership structure. While Thames Water has stated in court that its senior creditors are its “economic owners”, Ofwat maintains that the defunct 2024 shareholders remain the “ultimate controllers”.
Given that the current legislation only requires due diligence checks on equity shareholders rather than debt holders, L&VW has bypassed legal scrutiny, the MPs said.
L&VW said its plan provided the “fastest route to fix Thames Water’s complex problems”, adding that it “has never been in control of the company” and has never received a dividend.
“They [the creditors] have stepped in to fund a significant revenue shortfall to ensure Thames Water’s record capital investment programme can continue without disruption,” it added.
Thames Water warned that “anything that delays the recapitalisation risks slowing the turnaround, disrupting investment and increasing the cost of delivering the improvements our customers and the environment need.”