Within a month, the UK has seen two of its biggest companies face significant existential issues, and whilst the situations and industry sectors are very different, the level of public interest in their continued operation means that their outcomes could potentially affect each other.
The first is the fate of Thames Water, the biggest business water company in England.
After getting a stay of execution through a £3bn rescue loan, the company is exploring the possibility of funding from private equity firm KKR according to BBC News, the company known as the “Barbarians at the Gate” for their role in the leveraged buyout of RJR Nabisco.
The other company is British Steel, which was the subject of an emergency Special Measures Act in mid-April following an attempt by its parent company to force its shutdown.
Despite the two companies having very different issues and reasons for their similarly-timed crises, the same solution has been offered to both, and the extraordinary steps taken to protect British Steel could have ramifications for other struggling yet vital companies.
What Happened To British Steel?
British Steel and Thames Water are connected by the fact that both companies cannot truly stop functioning, albeit for different reasons.
British Steel, initially the British Steel Corporation before it was nationalised in 1967, privatised again in 1988, merged with Dutch steel company KNHS in 1999 before being bought by Indian company Tata Steel, sold to Greybull Capital in 2015 and finally sold again to the Chinese Jingye Group in 2020.
Whilst not technically an essential business in the same way as the water companies are, in practice, British Steel could not be allowed to shut down. If it did, the last two blast furnaces in the UK, both based at the Scunthorpe Steelworks would be almost impossible to start up again, and the country would no longer be able to produce its own steel.
The situation reached an acute crisis when the Jingye Group announced their plans in March 2025 to close the Scunthorpe Steelworks due to claims the plant is losing £700,000 per day, and this would intensify by not purchasing coking coal or iron pellets, which are vital raw materials that would force the blast furnace to shut down if not supplied.
This led to the unprecedented step of passing an emergency Special Measures Act to keep the plant running whilst the long-term future of British Steel the company and the British steel industry is determined.
How Does This Affect The Business Water Sector?
At the same time as the initial announcement by the Jingye Group, Thames Water was facing a similar existential crisis, with a complex financial rescue package being discussed in the High Court before it was ultimately approved, as announced by BBC News, on 17th March.
The long-running, self-inflicted financial crisis at Thames Water has certain echoes of British Steel, with losses mounting in no small part due to the nearly £20bn of debt owed to various banks and investors, whilst the poor quality of service has led to record-breaking fines.
Unlike British Steel, which could have gone out of business and shut down without government intervention, private water companies have a specific process if the company running them goes bankrupt or otherwise cannot continue to run the level of service legally required of them.
This is known as a special administration regime (SAR), which ensures that the water company does not simply cease to function and leave millions of people without clean, safe drinking water.
The High Court battle, whilst primarily between two sets of Thames Water’s creditors, raised the question of whether it would be in the best interests not only of the general public but of creditors to place the company into an SAR and either restructure the company or even nationalise it.
Depending on interpretation, it is possible that Thames Water has met three of the four conditions to qualify for an SAR:
- With £20bn in debts, it has shown that without emergency equity it can no longer pay its debts, and the likelihood that it can in the future is deeply uncertain.
- It has failed to meet its statutory and license obligations, given the expensive fines and criminal investigations against the company for raw sewage dumping.
- The argument was made in the High Court by Charlie Mayard MP that it would be in the public interest to do so rather than allow the company to accrue further debt that would further siphon money away from infrastructure improvements.
The only condition not met was that Thames Water did not ask to be put into an SAR, but only one of the four conditions needs to be met.
Nationalisation was ruled out on principle, with all options short of bringing water companies into public ownership on the table, but with British Steel setting the precedent that struggling vital industries can be brought back into public ownership to avoid dire consequences, it could happen to the water sector as well.
