Inconsistency and uncertainty have defined the business water sector in recent years, but over the past month, there is a sense that almost anything can happen.
The fate of Thames Water, the largest water company in England and one of the largest privately owned water companies in the world, is at the cusp of agreeing to a deal that would allow it to dodge fines until 2030, according to The Guardian.
The main leverage that creditors in the London & Valley Water consortium have is that the current government is keen on a market-based solution and aims to avoid public ownership wherever possible, blocking the option from a recent white paper on the sector.
However, could this steadfast position be changing? Should Thames Water and the entire sector be under public ownership? And is time running out for any alternative options?
Has The Government Ruled Out Nationalisation Of The Water Sector?
The current government has rather unusual and inconsistent positions when it comes to nationalisation and public ownership; whilst it claims to be in pursuit of market-led solutions, these words have not always been matched by deeds and may possibly be changing.
In the wake of a potential leadership challenge, potential candidate Andy Burnham has carefully chosen his words when it comes to “public control” of water and energy networks, something that has led to criticism for its vagueness.
However, even bringing up the possibility is a shift in position, and ironically is more consistent with the current actions of the government.
The Return Of Nationalisation
Whilst the government were keen on avoiding nationalisation of the water sector, they are currently in the process of nationalising the rail network, as part of a manifesto pledge to buy the companies when their contracts to run services expire.
This has led to far freezes whilst infrastructure upgrades are being prioritised to ensure trains are cheaper to run and more reliable. These are two of the biggest claimed benefits of nationalising utilities, although the government has claimed a £100bn price tag that has been disputed.
Meanwhile, the seizure of British Steel in 2025 is set to become an outright nationalisation of the steelworks, with Prime Minister Sir Keir Starmer outright stating that its “public ownership is in the public interest”.
Given that the same arguments have been made in favour of nationalising the water sector, it establishes a strong case for bringing Thames Water and potentially the entire sector into public ownership in the name of public interest.
Should Thames Water Be Nationalised?
It is increasingly evident that, whilst undesirable on the part of the government, nationalisation has not been ruled out as a potential option. However, is it the best choice for the water sector and for both business and residential customers?
Nationalisation has always been popular with the general public, who have ultimately failed to see the benefits of the private water sector since the 1989 reforms.
These reforms, which have not been repeated in any other country for any significant period of time, have been connected to increasing water bills, poorer service and a noticeable increase in pollution incidents.
According to The Independent, Andy Burnham demanded that United Utilities, the utility company for the North West of England, should cancel a dividend payment after significantly increasing bills during a cost-of-living crisis.
He also cited the most significant argument in favour of nationalisation during this speech; given that water is a natural monopoly and customers have no choice in their supplier, it should not be an industry that is run entirely for profit.
Whilst Mr Burnham has pointedly not advocated for nationalisation himself, instead using the term “public control”, it is clear that the current system is fundamentally not working for customers, causing disruption and harm in the process.
However, the very reason he made that speech could potentially be the tipping point leading to some form of public ownership.
Is Time Running Out For A Market Based Water Solution?
At a minimum, it will take at least ten weeks for any agreed deal for Thames Water to be approved, given that any deal between the creditors, Ofwat and the UK Government needs at least six weeks of consultation and an extra month to analyse the responses.
Given that Thames Water is set to run out of money by November without another infusion of cash, a deal needs to be agreed in principle by mid-August in order to avoid running out of cash and becoming insolvent.
If it did, Thames Water would become subject to temporary public ownership under the special administration regime.
Whilst often confused with nationalisation, the process is focused on ensuring the business continues to function, and millions of people still have running water whilst the business is restructured in preparation to be sold again.
It has only ever been undertaken once with the electricity supplier Bulb Energy, which was sold to Octopus Energy and ultimately made a small profit for the government.
However, if there is a plan to bring the whole water sector into public ownership, the first step may be the result of an SAR.
