Thames Water faces nationalisation amid rescue plans to sell firm to Chinese buyer

The government is preparing to take Thames Water, the UK’s largest water utility, into temporary public ownership, paving the way for a potential sale to a major Chinese infrastructure company. Ministers, with Environment Secretary Steve Reed at the forefront, are actively making arrangements to commence a special administration regime for Thames Water. This measure would effectively nationalise the company, eliminate a large proportion of its £16.8 billion debt, and facilitate the search for a new owner.

CKI, a Hong Kong-based conglomerate, has emerged as a leading bidder and has indicated its readiness to take over operations within weeks should the special administration proceed. This company is no stranger to British infrastructure as it already owns Northumbrian Water and UK Power Networks. CKI has expressed willingness to comply with stricter environmental regulations and tougher penalties, which many believe have rendered Thames’s current business model financially unviable.

The possibility of Thames Water being acquired by CKI is controversial, given the growing unease about foreign, particularly Chinese, control of critical British infrastructure. Earlier this year, CKI’s parent sold its interests in the Panama Canal port operator after significant pressure from US authorities under President Trump, highlighting ongoing global scrutiny around such transactions.

Yesterday, Steve Reed approved the appointment of FTI Consulting to advise the government on contingency plans, which would ensure customers continue to receive essential water and sewerage services if Thames Water were to collapse. The risk, however, is that a special administration process might leave taxpayers facing a multi-billion-pound bill. Public finances are already stretched, increasing the scrutiny on this potential bailout.

Initiating special administration is only possible if Thames Water becomes insolvent, fails to fulfil statutory obligations, or breaches an enforcement order. The government retains the power to trigger this process if the company and its creditors cannot agree on bailout terms, making this option increasingly likely amid growing political pressure.

Senior sources now believe a taxpayer-backed rescue has moved to the top of the government’s list of solutions after creditors failed to present an alternative. However, some creditors have voiced concern that such action would send a negative signal to future investors, especially as the government appears willing to favour a Chinese buyer over UK financial interests. The crisis began in spring 2024 when international investors withdrew, citing growing financial risk. Thames Water also leads the sector for pollution and leakage incidents, putting further pressure on ministers to resolve the matter swiftly.