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The government has begun drawing up contingency plans for the collapse of Thames Water amid growing doubts in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile.
Sky News has learnt that ministers and Ofwat, the industry regulator, have started to hold discussions about the possibility of placing Thames Water into a special administration regime (SAR) that would effectively take the company into temporary public ownership.
Such an insolvency process was used by the government when the energy supplier Bulb collapsed in 2021, sparking concerns that it could cost taxpayers billions of pounds.
Ultimately, the Bulb administration is likely to have cost the public purse a far smaller sum, but water industry ownership restrictions which prevent consolidation mean this figure could be dwarfed if Thames Water was to fail.
The talks within Whitehall, which involve the Department for Environment, Food and Rural Affairs (DEFRA), Ofwat and the Treasury, remain at a preliminary stage and relate at the moment only to contingency plans which may not need to be activated.
Thames Water serves 15m customers across London and the south-east of England, and has come under intense pressure in recent years because of its poor record on leaks, sewage contamination, executive pay and shareholder dividends.
On Tuesday, Sarah Bentley, its chief executive for the last three years, resigned with immediate effect, saying: “The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance.”
In March, however, Sky News revealed that Thames Water was facing crunch talks over its finances and had hired Rothschild, the investment bank, and the law firm Slaughter & May, to explore…
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