MPs urge Government to find alternative to Thames deal

(by Verity Mitchell)

The Environment, Food and Rural Affairs (EFRA) Select Committee has published a report following its evidence gathering on what it emotively calls “the dire situation at Thames Water.” It urged that ministers should explore all options for the company, including using the Special Administration Regime (SAR) or fresh legislation, to “draw a line under this debacle and restore stability to the sector by putting Thames Water on a sound footing for new buyers”. It also recommended that a new, more timely turnaround regime for failing companies be quickly established.

MPs were critical of the “little sign(s) of progress” at Thames even though it was placed into Ofwat’s Turnaround Oversight Regime in 2024. The regime, the committee said, was “imposed too late and has limited capacity to tackle the vicious cycles of penalty and failure”.

EFRA criticised London & Valley Water (L&VW) for putting forward proposals that demand “regulatory forbearance”. The committee is concerned about the lack of due diligence undertaken on the creditors that make up the L&VW consortium, their “behaviour" during the bidding process and their lack of investment strategies and expertise which is needed to save Thames. It argued that the consortium’s agenda does not align with the public interest.

The MPs recommended that Ofwat and the Government withdraw from negotiations with L&VW. It was critical of current legislation that has not clearly defined the threshold for SAR, calling it “not fit for purpose”. Future reforms, it said, should have more established triggers for SAR which would “prevent creditor takeovers and unnecessarily drawn-out negotiation in the future”.