Government drawing up contingency plans as Thames Water fights for survival

Contingency plans are being drawn ahead of the potential collapse of Britain’s biggest water company.

The government and Ofwat has started to work on the plans for the collapse of Thames Water amid growing concerns the company will not be able to service its debts of £14bn.

Thames Water serves 15 million customers in the South East and in parts of Gloucestershire and Wiltshire.

According to reports discussions about the possibility of placing Thames Water into a special administration regime (SAR) are already underway.

The move would effectively take the company into temporary public ownership.

The talks within Whitehall are said to involve the Department for Environment, Food and Rural Affairs, Ofwat and the Treasury.

Earlier this week chief executive Sarah Bentley resigned with immediate effect.

She said: “The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance.”

Thames Water employs about 7,000 people, and serves nearly a quarter of Britain’s population.

Alastair Cochran and Cathryn Ross have been named joint interim chief executives as a search for a new boss is carried out.

Joanna Ford, restructuring & insolvency partner at Cripps, said: “Thames Water has been the subject of a number of damaging fines in recent years amounting to some £15m, which places a further burden on its creaking balance sheet with overall debts of £14bn.

“The resignation of Sarah Bentley, its chief executive, on Tuesday after she was forced to give up her £1.6m bonus package is a further blow that highlights the turmoil at the water supplier.

“Although Thames Water is seeking additional funding from its shareholders, I can’t imagine that this will be a quick or easy process, as it is owned by a consortium of pension funds and sovereign wealth funds, who I understand are sceptical about providing further support having already provided new funding of £500m as recently as March this year.

“The conundrum for investors, though, is that if they don’t provide more funding and Thames Water then goes into administration, they will have lost everything.”