𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

New prime minister Andy Burnham faces several immediate challenges to turn around national fortunes – with the future of Thames Water a particularly key decision after he previously suggested it could be nationalised.

Those behind the firm had proposed to write off half of its debts in exchange for leniency from future pollution fines, among other factors, but the offer has been rejected previously by the government, who informed regulator Ofwat it was not good for consumers or the environment.

Nationalising the company would put control in the hands of the public – or the government, more specifically – but would also likely leave the current lenders to seek the full amount of debt to be repaid, which would cost the nation billions.

Mr Burnham could still argue for greater public control of the debt-laden entity, which owes nearly £20bn and which said last week it only has enough cash to last until the end of 2026, meaning it will need a £2bn cash injection for another year.

Alternatively a sale, temporary administration or any other number of routes could still be on the table.

Will Thames Water be taken into public ownership?

The owners of Thames Water are not likely to allow nationalisation to happen easily.

Already reports suggest they are preparing legal challenges and creditors of Thames Water say they are working with both regulators and the government to ensure a positive outcome.

Existing investors are reported to have floated the idea of part-nationalisation and a so-called golden share for ministers, according to the Telegraph.

That would give them an option to veto key decisions and potentially have an equity stake in the business, to share in profits.

What happens to my bills?

For customers, the immediate message is that the taps will stay on.

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If Thames Water enters special administration or is effectively nationalised, households and businesses will continue to receive water and wastewater services as normal. The government has repeatedly stressed that supplies will not be interrupted.

Bills will still need to be paid. Water companies continue to operate while in special administration, with revenue used to fund day-to-day operations and investment in the network.

Whether bills rise in future is a separate question. Ofwat has already approved higher charges over the next five years to help fund improvements to ageing infrastructure and reduce sewage pollution. Those increases would not automatically disappear if the company moved into public ownership.

Longer term, the government would have to decide whether taxpayers should shoulder more of the cost of investment instead of customers through higher bills.

What happens to shareholders, creditors and staff?

Shareholders would almost certainly be the biggest losers.

Thames Water’s equity has already been largely wiped out after years of financial turmoil, and any move into special administration could leave shareholders with little or no compensation.

The bigger battle would be over the company’s roughly £20bn of debt. Creditors could face significant losses or be forced to accept a restructuring of what they are owed. How much taxpayers ultimately pay would depend on how the government chooses to deal with that debt.

Employees are expected to remain in their jobs.

A special administration regime is designed to keep essential public services running while a long-term solution is found. Staff would continue operating the network, repairing leaks, maintaining treatment works and responding to emergencies.

What’s the timeline?

Any move into special administration could happen quickly if ministers conclude Thames Water can no longer remain financially viable.

The High Court would first appoint a special administrator, who would take over running the company. From that point, Thames Water would continue operating while the administrator stabilised the business and worked on a long-term solution.

That process could take many months, or even several years. During that time, the government would decide whether to return the company to private ownership, restructure it with new investors or retain it in public hands for longer.

Customers are therefore unlikely to notice dramatic changes overnight. The biggest decisions – over ownership, debt and future investment – would play out gradually behind the scenes.

A government spokesperson said: “The government will always act in the national interest on these issues. The company remains financially stable, but we stand ready for all eventualities, including applying for a Special Administration Regime if that were to become necessary.”

How much will it cost the taxpayer?

The big issue is that Thames Water has £20bn of debt. The question is, does the government honour that in full, in part or not at all?

Some economists say the real cost of taking on Thames Water is neutral. Since the government would be getting an asset worth at least what it cost to buy.

The bigger issue is years of investment to replace ageing pipes, reduce sewage and improve reservoirs. This will cost billions, but no-one is sure how many.