Thames Water avoids nationalisation after legal challenge to £3bn bailout dismissed by court

A £3bn rescue loan for Thames Water can proceed, the Court of Appeal has ruled – allowing the troubled company to stave off temporary nationalisation.

The debt-laden water giant secured the cash lifeline from creditors last month, after warning it would run out of money before the end of March.

Today (17 March), the Court of Appeal has blocked a legal challenge against the terms of the deal – a “terrible” outcome that campaigners warn will continue to “pile financial pressure” on ordinary bill payers.

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“Yet again, bill payers will pay for the gross financial mismanagement at Thames,” said Matthew Topham the lead campaigner for We Own It.  

“Thames Water is drowning in a sea of debt. Taking on another £3bn of debt is like trying to bail out water by opening another hole in the hull. So yes, we will be back in this position again.”

The High Court granted Thames Water approval for the emergency debt package last month – but the terms of the deal were appealed by a small group of creditors and Liberal Democrat MP Charlie Maynard. Maynard had argued that extra lending was not in the public interest, and that the supplier should be taken under government control.

Struggling under a £19bn debt pile – all accrued since water was privatised under Margaret Thatcher – Thames faced the prospect of a ‘special administration regime’ (SAR), a form of temporary nationalisation

But the Court of Appeal dismissed the appeal against the emergency debt package today. In so doing, they have “flushed away” a billion pounds of taxpayer money, Topham said.

“We know that nearly a billion pounds of this ‘rescue’ package will go on interest fees. None of this money will touch the sides of the crisis at Thames Water. It will continue to service the financial interests of shareholders.”

The headline interest rate on the new loan is 9.75%. We Own It claim that the loan could add £250 to the average annual household bill, which already exceeds £470 per year.

Yet Thames want to increase bills even more – they are currently appealing to industry regulator Ofwat to let them increase bills by more than the 35% Ofwat has already permitted.

Thames Water’s chief executive Chris Weston was “pleased” with today’s decision, describing it as “decisive”.

“We remain focused on putting Thames Water onto a more stable financial foundation as we seek a long-term solution to our financial resilience,” he said.

The company had claimed that if the rescue deal was blocked, a government rescue would have cost taxpayers billions.

But campaigners disagree. They argue that SAR allows government to negotiate a significant reduction in the corporate debt, due to the water company failing to discharge its responsibilities. Previously, Maynard – who brought the appeal – called on the government to intervene with SAR, using the concept of a “debt haircut” to wipe out existing debt.

Avoiding SAR means “ throwing good money after bad,” Maynard said. “The money from our bills which is being spent on interest repayments is desperately needed to repair water infrastructure, improve customer service, and clean up our rivers.”

Today’s decision merely delays another day of reckoning for Thames, Topham added.

“This was a big opportunity but the devastating truth is Thames Water is in a permacrisis. It could be by June that they find that certain clauses of this deal aren’t met – we might be back in crisis then. Even if everything goes perfectly with this deal, by 2026 will be seeing them out of money again as the deal runs out.

“We go round and round in a kind of merry-go-round crisis at Thames. And so it could be months and it certainly won’t be more than years until we’re back at a point where the government will have to consider bringing Thames into public ownership again.”

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