Block Thames Water bailout to save customers hundreds, High Court urged: 'We're being stuffed'

Could the government take control of ailing water giant Thames Water? Campaigners and several MPs think so – and this week is a critical fork in the road.

Protesters gathered outside the Royal Courts of Justice on Monday morning (3 February), where the heavily indebted company is seeking High Court approval for a £3bn cash injection from creditors.

The hearing is scheduled for four days. If the court blocks the lifeline – offered at a staggering 9.75% interest rate – Thames Water claims it will run out of money within a month.

Today, campaigners urged the court: “Block the bailout.”

MP and former shadow chancellor John McDonnell told a furious crowd of 70-odd protesters that he was “sick to death” of water companies profiteering at the expense of customers.

“Year after year they increase their charges. Today… they are expecting paying customers to bail them out yet again, so they can pay their shareholders high dividends,” he said.

“Some people might not like it, but there’s a simple solution. [Water] is a natural resource; it should be owned by the people themselves. Don’t give them [water companies] another opportunity to exploit us. Don’t give them another opportunity to poison our water.”

Thames Water’s debts exceed £16bn, all accrued since it was privatised in 1989. In the past three and a half decades, it has borrowed to fund investments and pay dividends to shareholders, taking on further debt to finance interest payments.

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If approved, this new loan will accrue £300m in interest annual over two and a half years. Campaign group We Own It claims that this will add an extra £250 a year to the average bill.

Liberal Democrat MP Charlie Maynard slammed Thames Water for expecting customers to bail them out of the “debt doom loop”.

“These companies are not fixing our rivers. Between a quarter and a third of your bills will be spent on the interest expenses – just the interest expenses.”

Responding to a shout from the crowd, he added: “It is money down the drain, that is bang on. We are being royally stuffed.”

The process comes just a few months ahead of yet more bill hikes. In December, industry regulator Ofwat gave companies permission to increase their bills by 35%. Customer fees will surge by an average of £31 per year over the next five years from April, bringing the average water bill to £588 by 2030.

Having initially applied for a 53% increase, Thames Water is considering appealing this decision. Executives claim it needs the money to fix creaking waste infrastructure.

Yet last week, a damning report by environmental scientists published in the journal Nature Water found that companies had “deliberately overstated” the cost of fixing the crisis to “manager customer expectations” around bills; examples of blatant “greenwashing and disinformation”.

Water companies pumped 12.7 million hours of untreated sewage into English waterways between 2019 and 2023.

What would happen if the government took Thames Water into special administration?

Special administration is an insolvency process for businesses that provide a critical public service – in short, businesses that cannot be allowed to go bust.

Under a Special Administrative Regime (SAR), the government would temporarily take control of Thames Water.

How much all this would cost – and who would foot the bill – is an open question. According to one consultancy, running the ailing water giant could cost the government around £2bn per year.

But campaigners dispute this figure. They claim that the companies failure to fulfil its statutory obligations mean much of the debt could be written off.

This proposal hinges on the concept of a ‘debt haircut’, meaning creditors agree to accept less than the full value of their loans to help the company restructure and survive.

This shifts the financial burden to creditors and shareholders, not taxpayers.

But full debt write-offs are rare, and amid chancellor Rachel Reeves’ obsession with growth it seems unlikely the government would pursue this course of action. Under this logic, nationalising a business would spook bondholders in other industries, making it less likely that they invest in the UK.

But the government must act, said Matthew Topham, lead campaigner at We Own It – or risk setting a dangerous prededent.

“This illegal tactic has never been used by a utility before. If it succeeds, you can bet that every other firm will be watching closely, and be wanting to reproduce that outcome to protect their interests against the interest of the public,” he told Big Issue.

“It could cost households a massive amount of money. But it could also set a precedent if a failed privatised firm – water firm or otherwise – has worked itself up into debt and ecological crisis, it can push the cost of sorting that onto billpayers.”

“We don’t think that’s right, we think Thames Water should fall into public ownership, on the cheap, so that we can invest in it for the long term.”

“What mustn’t happen, is the government shouldn’t clean up the mess of privatisation and then sell it back on the cheap into the private sector. We need permanent public ownership, like nearly every other country has.”

Last week, a cross-party group of nearly 30 MPs wrote to Ofwat’s chief executive asking for Thames Water to be placed in special administration.

“Thames Water epitomises the systemic issues plaguing the private water sector,” said Labour MP Clive Lewis, who spearheaded the letter.

“Approving a hedge fund bailout would reinforce a broken system where mismanagement and shareholder interests are rewarded at the expense of customers and the environment. Special administration offers an opportunity to reform the industry by bringing Thames Water into public ownership and ensuring the public has a voice in managing this essential resource.”

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