The UK’s biggest water polluter has avoided privatisation with a £3 billion rescue loan – but how will it spend the money?

The government – both Tory and Labour – has been on standby to put Thames Water into special administration (which is basically nationalisation) since it was revealed 18 months ago that the firm was £17 billion in debt (some now say £19 billion).

Company bosses will do anything, it seems, to avoid that – and had been offered £3 billion in two instalments by investors, to shore it up while they restructure the business.

(This is not restructuring how the business operates, though – it is a restructuring of the business’s debts and an attempt to attract even more money from potential new investors.)

The plan had been opposed by a group of creditors – people who are owed money by the firm – who said the 9.75 per cent interest rate on the loan was too costly.

But a High Court judge approved the loan – and the restructuring plan – today (Tuesday, February 18, 2025).

The first £1.5 billion payment will keep the firm afloat until the autumn. The second will be used to fund an appeal against regulator Ofwat’s decision to limit the amount by which it can increase its bills to 35 per cent over five years. Thames Water bosses want 53 per cent.

None of the money may be used to pay the hundreds of millions of pounds in financial penalties that Thames Water has built up due to its pollution of the waterways and failure to invest properly in its own infrastructure.

Will the service improve and pollution drop? Apparently not.

Back in 2023, This Site ran an article after economist Richard Murphy analysed the water companies’ finances.

I wrote:

Economist Richard Murphy has examined the finances of all the privatised water companies, and has come back with several conclusions:

• Their operating profit margin is a staggeringly-high 35 per cent. From this, we may conclude that there is no reason for Thames Water to be in danger of insolvency.
• Every single penny they have made in profit has been paid out to shareholders in dividends. None was reinvested in infrastructure or equipment (borrowing paid for equipment and the infrastructure was ignored). So Tories like those on the BBC’s Politics Live on June 28 were wrong when they said money has been invested in improving infrastructure. We can’t say they were lying because they may have been misinformed, but someone definitely lied to them.

Mr Murphy’s conclusion on this is stark: “The public is being fleeced by these companies who are simply treating the fact that the English consumer has had no choice as to who to buy water from as a means to extract profit from them.”

But that’s not all!

• The industry has made investments – £77bn on equipment, the rest on other financial investments. This has been funded mostly by borrowing, with £13bn coming from shareholders. This means the claim (when water was privatised) that private capital would fund water after privatisation was nonsense gibberish; it is being funded by borrowing.
• Mr Murphy’s figures show £13bn invested by shareholders, who have received £25bn in dividends, meaning that for every pound they have put into the industry, they have received nearly two pounds in return.

Finally:

• It is clear that the water companies are environmentally insolvent. This means their business structures are not sustainable in terms of reducing pollution and if they are made to put in the necessary money to do so, they will go bankrupt.

What this means, of course is that the water firms have been polluting the UK’s waterways to a staggering extent.

Because they decided to take their massively-overinflated profits for themselves rather than invest them in improving the sewage system, the water companies and their shareholders have created a problem that will cost £260 billion to solve – and if they are made to shell out that money now, they will all go out of business.

The answer to all this, of course, is re-nationalisation.

Ah, but the government says this is too expensive, because of the cost of buying out the shareholders!

Is it, though?

Mr Murphy says no compensation should be offered to shareholders at all, because they have behaved in an irresponsible way that means it will cost more money to fix the problems they have created than they originally paid to own their parts of these firms.

He adds that providers of loans to the water firms may have to take a hit as well, because they made bad decisions in lending to these companies.

I added that the Tories in government were unlikely to accept this because, even though it was in line with a basic principle of business that if you invest in something unprofitable, you lose money, it diverged from their strategy in privatising water in the first place: that the profits would go to private shareholders and it is the losses that will be paid for by the public and customers.

Mr Murphy makes another excellent suggestion – which is that, because the water industry will need to be supported with borrowed funds, it should issue water bonds to the public via ISAs. You could save in a way that ensures we get clean water in the future.

Sadly, it seems the court has permitted Thames Water to dodge the nationalisation guillotine, so this plan may not be put into practice for many years to come.

In the meantime, around a quarter of the UK’s population, who have no choice but to buy water from Thames as it has a monopoly on the supply, are facing huge bill rises and continued deterioration of service.

---

Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:

Be among the first to know what’s going on! Here are the ways to manage it:

1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.

2) Follow VP on Twitter @VoxPolitical

3) Like the Facebook page at https://www.facebook.com/VoxPolitical/

Join the Vox Political Facebook page.

4) You could even make Vox Political your homepage at http://voxpoliticalonline.com

5) Follow Vox Political writer Mike Sivier on BlueSky

6) Join the MeWe page at https://mewe.com/p-front/voxpolitical

7) Feel free to comment!

And do share with your family and friends – so they don’t miss out!

If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!

Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:

The Livingstone Presumption is available
in either print or eBook format here:

Health Warning: Government! is now available
in either print or eBook format here:

The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here: