Investors in Thames Water have cautioned the Labour government that a temporary nationalisation of the struggling utility would slow its turnaround. The warning follows comments from Greater Manchester Mayor Andy Burnham, who suggested he would renationalise water and other businesses if he became prime minister.
Thames Water is facing a funding crisis and will run out of money by November unless new investment is secured. The company says it is close to agreeing a rescue deal led by creditors with the water regulator Ofwat. The deal would require a six-week consultation over the summer and about a month for consideration before implementation.
Without a deal, the company could be placed under a 'special administration regime', effectively a form of temporary nationalisation. The London & Valley Water consortium, a group of creditors involved in the rescue, argued that such a move would complicate efforts to fix the company. The consortium stated that Thames Water urgently needs £10bn for improvements and compliance, and that special administration would delay the turnaround.
The consortium emphasised that their plan is the fastest route to solving Thames Water's problems without government funding. Under Prime Minister Keir Starmer, the government has supported an industry-led solution. However, Burnham and other potential Labour leadership challengers have advocated for nationalisation, citing years of industry problems.
Investor concerns over Burnham's potential return to parliament and challenge to Starmer led to sharp falls in water company share prices on Friday. Severn Trent and Pennon fell over 8%, while United Utilities dropped over 6%. Thames Water has been struggling for over two years, with £17.6bn debt since privatisation, and a previous sale attempt failed when preferred bidder KKR withdrew.
