Reports of a “recovery regime” for struggling firms attracts backlash

There has been an angry backlash to reports first leaked to the Financial Times that Ofwat is considering reducing financial penalties for financially struggling water companies to help them get back on their feet.

The FT scoped out a “recovery regime” package which included few or no regulatory penalties to encourage investment in infrastructure improvement, and lower performance targets – in exchange for quarterly reporting on performance and dividend restrictions. According to the report, Thames Water, Southern Water, Yorkshire Water and South East Water may be eligible for the regime. That would also help avoid Thames Water going into special administration, without singling it out as a special case.

The move would help companies recover performance by enabling greater investment, and support equity raising. However it has been roundly condemned by clean river campaigners, some politicians, and other commentators including Professor Sir Dieter Helm who has argued Thames would best be taken into special administration and split up.