Thames Water: where are we now?

(by Verity Mitchell)

As 2025 draws to a close, Thames Water is continuing to draw down its emergency loans, invest and make operational improvements. In the background, at not inconsiderable cost, its creditor group continues to negotiate with Ofwat on a revised longer-term financial arrangement to secure the utility’s refinancing.

Thames Water has deferred awarding bosses retention payments totalling £2.5m to avoid public censure. The retention payment package for 21 senior executives, which had been due to go out this month, will remain on hold until the new year, according to management. This is separate from any senior executive bonuses prohibited under the Water (Special Measures) Act.

Thames Water Utilities has now drawn £1.193bn from its £1.5bn facility, according to a statement regarding the company’s seventh consent. This represents approximately 80% of the total available funding, putting all parties under pressure to reach a satisfactory agreement.

Capital investment as reported at its half-year results increased by 22% year-on-year to £1.3bn (a larger increase than some of its peers). Gearing increased to 85.9%, up by 1.5% since 31 March 2025.

It is worth recognising that the company has recorded operational progress. At the end of September:

• Pollution incidents (categories 1-3) dropped by 20%, supported by a 15% increase in blockages cleared and progress on the pipe relining programme.

• Leakage rates did not decline, compared to industry peers — but Thames has achieved a 13.3% reduction against the 2019-20 baseline.

• Thames Water achieved a record first quarter for water supply interruptions, with an average of 4 minutes 42 seconds, which falls within the set target.

• The Compliance Risk Index (CRI) showed improvement, though the company missed its target due to a single failure at one of its largest sites.

Customer complaints increased significantly, rising to 55,158 from 31,600 in the prior period, largely because of price rises. However, water and waste complaints specifically fell by 11%. Thames Water launched a successful pilot in London to automatically enrol customers experiencing financial difficulties in assistance programmes, even where customers are unaware of their eligibility. Bad debts remained broadly stable at 4% of revenues compared to 3.9% in the prior period.

However, performance against sector benchmarks was mixed. The company met or exceeded the sector median in eight of twelve common performance measures, and was among the top performers for sewer collapses, per capita consumption and leakage in Ofwat’s 2024-25 Water Company Performance Report, despite an overall ‘lagging’ rating.

Thames has paid £57m in the last six months to advisors assisting in the equity raise and balance sheet restructuring process, which is 11.5% of its profit before tax. Lawyers, financial advisors, investment bankers and regulatory experts have all been engaged.

The Consumer Council for Water insists that whatever package is agreed, Thames must not be given special treatment compared to its peers. Any softening of regulatory targets or avoidance of fines would both set a very poor regulatory precedent and would potentially be open to challenge.

It appears that there is momentum to produce a solution in 2026 – but its acceptability to Government, rival bidders and other water companies remains a challenge.