Let Thames Water Fail – A Case for Public Ownership

Thames Water recently secured a £3 billion emergency loan to avoid collapse but much of the money will be used to service debt rather than improve the water services for the public. This situation raises serious concerns about the company’s financial management and whether it should be allowed to fail and revert to public ownership.

Thames Water’s financial woes did not appear overnight. Years of mismanagement resulted in a massive debt of about £20 billion. Rather than investing in infrastructure, the company focused on paying dividends to shareholders. This strategy left the corporation with antiquated facilities, frequent leaks, and environmental issues. Despite being the UK’s largest water supplier with 16 million consumers, service quality has declined.

Let Thames Water Fail - A Case for Public OwnershipThe High Court recently approved a £3 billion loan with a high interest rate of 9.75% and fees and other costs totalling around £200 million. A considerable percentage of the loan will be used to pay down this debt. This means that the monies will not be used to replace ageing infrastructure or improve water quality, but rather to reward creditors and private equity investors. Consumer organisations and environmentalists have criticised the prioritisation of debt repayment over public services.

Customers bear the consequences of this financial plan. Service quality is still poor, with numerous leaks and pollution incidents. Under-equipped sewage treatment plants continue to discharge untreated wastewater, endangering nearby ecosystems. These concerns are exacerbated by the company’s proposal to increase consumer bills by 35% over the next five years in order to meet its debt obligations. It is unjust to expect consumers to suffer the consequences of years of mismanagement when service quality stays static.

Critics argue that Thames Water’s financial structure is fundamentally flawed. The company’s debt-driven model prioritises shareholder profits over investments in critical infrastructure. This approach jeopardises its capacity to provide dependable services and meet environmental regulations. According to the Financial Times, temporary renationalisation, known as special administration, might efficiently reform the company’s finances and operations.

The privatisation of water supplies in England and Wales has sparked controversy. While it intended to increase efficiency and investment, it has frequently resulted in the contrary. Executives and offshore shareholders have benefitted, while customers have faced increased costs and diminishing service quality. Public ownership of water utilities could alleviate these difficulties by prioritising public interest over profit. A publicly held company would prioritise infrastructure development, environmental compliance, and service quality. Revenues would be reinvested in the system rather than distributed as dividends to shareholders.

Allowing Thames Water to collapse and transfer control to the public could realign priorities. It would provide an opportunity to rebuild the organisation with a focus on long-term viability and responsibility. Government control might guarantee that monies are directed towards improving services and protecting the environment. This approach would rebuild public trust by ensuring that water services are managed in the best interests of both consumers and the environment.

Thames Water’s current financial strategy, which prioritises debt servicing over service enhancement, demonstrates the flaws of privatisation. With rising debt and decaying infrastructure, the company’s difficulties are unlikely to be rectified with additional private financing. Public ownership presents a feasible solution to the systemic difficulties afflicting the UK water supply business. 

A publicly owned Thames Water could provide better service, safeguard the environment, and assure long-term viability by putting the public interest and accountability first.

Further reading:

  1. “Why is Thames Water getting £3bn and will it save it from collapse?” – The Guardian: https://www.theguardian.com/business/2025/feb/18/how-will-approval-of-3bn-emergency-debt-package-help-thames-water-avoid-collapse
  2. “Time to put Thames Water out of its misery” – Financial Times: https://www.ft.com/content/8534e4cc-7961-4df0-8993-8e7f21625c6f
  3. “The wretched state of Thames Water is one of the best arguments for public ownership” – The Guardian: https://www.theguardian.com/commentisfree/2023/jun/28/thames-water-public-ownership-water-privatisation-england-and-wales-executives-shareholder