The last few years have been challenging for the water sector, to say the least, and with a new set of business water rate increases set to take effect from this year until 2030, the shape of the industry has come into question once again.
Just a few days into the new year, and the controversies and concerns have not gone away, with the epicentre of controversy being Thames Water, the biggest private water company in the UK and one that has been on the cusp of collapse for years at this point.
According to the BBC, the Member of Parliament for Oxford West and Abingdon, Layla Moran, asked if the UK government was ready for what she described as Thames Water’s “inevitable failure”.
Is this actually the case? What could happen to Thames Water in 2026? And how could this affect water rates for domestic and business customers going forward?
What Are The Future Plans For Thames Water?
The statement in question, a particularly striking and clear rebuke of a company that has over a decade of publicised struggles, is in relation to the South East Strategic Reservoir Option, which would provide a store of water acquired during the winter months that could supply customers for Thames Water, Affinity Water and Southern Water.
The consultation into this, which closed in early January 2026, is a long-term infrastructure project that will take over a decade to build and is expected to be in operation starting in 2040, if their planning application is ultimately successful.
This is part of a huge network upgrade designed to make amends for the consistent failings of the past and secure Britain’s water supply for the future at a time when there are a growing number of strains and stresses against it.
However, concerns have been raised about Thames Water’s ability to avoid administration this year and thus their ability to oversee a project that will last at least 15 years.
Why Are There Concerns About Thames Water’s Future?
A House of Commons debate about The Future of Thames Water highlighted the concerns and lack of trust that the company, and the major privately owned water companies more broadly, currently possess following over a decade of failing standards.
Ms Moran went as far as to claim that she did not trust Thames to “run a bath”, to say nothing of a major reservoir project, and given that Thames is still mere months away from running out of funding to pay its obligations, wondered if the government was prepared for when its emergency funding runs out.
Whilst the Hansard transcript does not use the word “inevitable” the way the BBC article does, the sense of an inevitable impasse remains clear, as is the belief that the end of this particular Thames Water saga will not be a “market-led solution” but a special administration.
What Is Thames Water’s Litany of Failings?
Layla Moran MP was quoted by the BBC as saying that Thames Water had a “litany of failings”, which has affected her trust and the trust of the general public to oversee a major reservoir facility and upgrades to the network.
These issues have not only led to significant fines and enforcement action from Ofwat, but have also made Thames far less attractive for investors, as despite the revenue potential from a natural monopoly such as a private water company, the amount of investment required to avoid further fines and the risk of prosecution is significant.
KKR, one of the largest private equity firms in the world, stepped back on a potential plan to invest £4bn into Thames Water in May 2025, citing these issues as the main factor in that decision.
The older infrastructure, which has led to leaking pipes, an increased number of blockages and the highly controversial practice of discharging raw sewage into waterways outside of the emergency situations where such an approach is allowed, will require considerable investment to fix.
Following years of dividends, loans and asset stripping, billions of pounds were taken out of Thames Water, leaving customers with significantly higher bills and a worse service as a result. Prime Minister Sir Keir Starmer was quoted by the BBC as saying that such payouts to shareholders were not fair.
The decade of mismanagement has had a consequential effect on the trust both business and domestic customers have in the ability of the larger water companies to effectively manage and improve the UK’s water network, and a growing number of experts are seeing a special administration or nationalisation as the inevitable next step.
