Should water companies should be nationalised? Have your say
The government has refused to be drawn on whether it plans to nationalise Thames Water, after a US private equity giant pulled out of plans for a rescue deal to keep the struggling provider afloat.
Britain's biggest water supplier, which has 16 million customers, chose KKR at the end of March to be its preferred bidder under plans to invest around £4bn of new equity.
Now, however, Thames Water says KKR is not 'in a position to proceed' and that its preferred bidder has dropped out.
KKR's withdrawal comes just days after talks with Downing Street officials, with sources close to the deal telling Sky News that the firm's New York-based executives were not comfortable with the risk of propping up Thames Water, which has about £19bn in debt.
Thames Water said it is instead taking forward talks with 'certain senior creditors' on an alternative plan, while consulting with regulator Ofwat.
These creditors are the bondholders who effectively own the firm after the High Court approved a financial restructuring loan of up to £3bn to keep the company running until summer 2026.
While the government has not abandoned helping to secure a new private-sector deal, the latest development raises the spectre of temporary nationalisation of Thames Water once more.
Environment Secretary Steve Reed insisted that 'Thames itself remains stable', but added: 'The government is clearly keeping a very close eye on what's going on.'
Water companies have faced public and political outrage over the extent of pollution, rising bills, high dividends, and executive pay and bonuses.
Thames Water hiked consumer water bills for customers by an average of 31% in April and incurred further wrath over plans to pay senior bosses large bonuses linked to the water company securing a £3bn emergency loan, which were later dropped.
Calls for the government to step in and take Thames Water into public hands have mounted further after the latest setback with KKR, with Lib Deb MP Charlie Maynard claiming: "The company is now at the end of the road.
'The government needs to bite the bullet and put Thames Water into special administration so its unsustainable debt can be written down and the interests of Thames Water's 16 million customers can be protected.'
Russ Mould, investment director at AJ Bell, said that Thames Water "has been like a sponge, soaking up debt and getting into a financial mess", and that it is looking increasingly like it will have to be nationalised.
He said that if the government did step in, it "would represent a soggy end to what's been a failed privatisation".
However, not everyone believes that nationalising water companies will serve the public's interests, including Lord Howard, who led the privatisationof the industry more than 30 years ago under Margaret Thatcher.
Defending payouts to investors as crucial to maintaining critical water infrastructure, he told BBC Radio 4 in 2023: "You can pay for them by borrowing, in which case interest has to be paid to the lenders, or you can pay for them by raising private capital, in which case dividends have to be paid to the people who provide that capital.
"That is the only choice available, there is no free lunch."
Water UK argues that before privatisation, England's water system was "underfunded, inefficient, with poor service and a disastrous environmental record which left rivers and beaches badly polluted", adding that investment "doubled" afterwards.
Environment Secretary Steve Reed has said nationalisation was 'not the answer' to a failed bid to rescue Thames Water, claiming public ownership could pull money away from the NHS.
Speaking in Parliament today, Reed said 'We are not looking at nationalisation because it would cost over £100bn of public money that would have had to be taken away from other public services like the National Health Service to be given to the owners of the water companies.
'It will take years to unpick the current model of ownership, during which time pollution would get worse and we know that nationalisation is not the answer – you only have to look at the situation in Scotland to see that."
However, the government's £100bn figure has been called into question, with The Guardian reporting in September last year that the number was based in a 2018 report by the Social Market Foundation think tank, which was commissioned by United Utilities, Anglian Water, Severn Trent and South West Water.
Economist Sir Dieter Helm described the analysis as 'economically illiterate', while Moody's rating agency estimated that nationalisation could cost a £14.5bn – nearly a tenth of the government's estimate.
Looking at Thames Water specifically, consultancy firm Teno has suggested temporary nationalisation, over an 18-month period, could cost between £3.4bn and £4.1bn.
So, what do you think? Is it time to nationalise the UK's water industry? Let us know in the poll below?
Should water companies should be nationalised and run in the public sector?Come back on Friday to read the results and analysis via the link below.
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