Cost of Abingdon Thames Water Reservoir Project Surges to £7.5 Billion Pounds

Thames Water is set to announce that the price tag for its proposed reservoir near Abingdon in Oxfordshire has soared to as much as £7.5bn, a substantial escalation from the initial £2.2bn projection. The revelation comes as the company points to spiralling construction expenses and heightened material costs, rapidly outstripping previous assumptions for the development. The site, known officially as the South East Strategic Reservoir Option or Sesro, has so far only seen preliminary engineering work completed.

The impact will be keenly felt by the company’s 16 million customers across London and the South East, who are already bracing for a 35 percent increase in their water bills spread over the next five years. The full cost of the new reservoir is earmarked to be recovered from householders, adding significant financial pressure at a time when living expenses continue to climb across Britain.

The government has placed its backing behind the project, designating it as a nationally significant infrastructure priority, with Chancellor Rachel Reeves pledging support for nine new reservoirs across the UK. The Abingdon development alone would store up to 150 billion litres and span farmland between Steventon, East Hanney and Drayton, encompassing an area the size of Gatwick Airport. Despite these ambitions, only minor early works have commenced, with completion targeted for 2040.

Controversy surrounds the project following its fast-tracked approval, a process which bypassed a public inquiry and generated local opposition. Campaign groups have raised concerns over potential flooding risks and questioned regulatory oversight. Critics argue that regulatory agencies such as Ofwat and Defra failed to scrutinise the original budgeting thoroughly, allowing for an underestimation of final expenses. A recent High Court challenge by local advocates was dismissed, but the mounting price tag is expected to fuel further opposition.

Thames Water’s financial stability remains highly uncertain. The company, burdened by £17bn in debt, now faces the threat of nationalisation after the collapse of a planned £4bn rescue investment by private equity group KKR. The government has since brought in insolvency advisers to prepare for a potential administration scenario, which may require a taxpayer-backed bailout estimated at around £4bn. Creditors have submitted an alternative £17bn bailout proposal, the terms of which hinge on regulators waiving significant sewage pollution fines—a move Environment Secretary Steve Reed appears reluctant to countenance.

Nevil Muncaster, strategic water resources director at Thames Water, emphasised that the reservoir is vital for safeguarding the region’s long-term water supply, identifying it as one of the preferred options in the company’s fifty-year water resource management strategy. Ministers maintain that delivery of increased water storage is critical, particularly as parts of Britain are now officially in drought. The escalating costs and operational uncertainty continue to shine a spotlight on the UK’s ability to finance and execute major public infrastructure, with this scheme following in the problematic footsteps of HS2 and Hinkley Point C.