By Jessica Shankleman | Updated on Jun 10, 2026 at 05:51 PM
The board of UK watchdog Ofwat remains locked in a stalemate over the future of Thames Water and the decision about the future of the utility is now complicated by a possible change in prime minister, according to a person familiar with the matter.
Prime Minister Keir Starmer is expected to face a leadership challenge in the coming weeks if Greater Manchester Mayor Andy Burnham wins a special election next week. Burnham has said he wants to bring the UK’s biggest water and sewerage supplier into public ownership.
Thames Water has been on the brink of collapse for more than two years and its creditors have been in negotiations with Ofwat to try to agree an emergency deal to avoid special administration. However, Ofwat’s board has still not reached a consensus on the deal floated in March, the person said, asking not to be identified talking about confidential negotiations.
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The UK’s leadership uncertainty further complicates matters because the Treasury would need to fund Thames’s capital spending commitments while it is temporarily nationalized, the person added. Deciding to fund that scale of investment would be a key decision for any future prime minister.
Thames Water is expected to spend as much as £20.5 billion in the five years to 2030, as it looks to fix chronic leaks, sewage spills and find new sources of water.
Senior creditors, including Silver Point Capital and Elliott Management, have offered to inject around £3.35 billion ($4.5 billion) of equity and take a haircut of up to 30% to lighten the company’s debt load. Creditors are also asking Ofwat to let Thames off regulatory penalties until March 2030.
Some board members think that deal falls short both in the size of the haircut and equity injection and in the leniency on penalties, Bloomberg previously reported . An agreement with senior creditors is widely seen as the last chance for a market-led solution to get Thames Water back on its feet.
A spokesperson for Ofwat said it continues to engage with the utility and is “reviewing their plans carefully to assess whether they deliver a turnaround in the company’s operational performance and strengthen its financial resilience to the benefit of customers and the environment.”
A spokesperson for Thames Water said the firm “remains focused on securing a recapitalisation to restore financial stability, continue its operational turnaround and deliver essential services for 16 million customers” and that the “proposed deal is intended to support and accelerate that turnaround.”
If the creditors’ deal were to be approved, Thames Water will have to pay £749 million, including advisory fees to bankers and lawyers, according to a report by the Financial Times on Wednesday. That includes £160 million in fees to senior creditors, as well as £254 million in “other costs” led by advisory fees to lawyers and bankers, it said.