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Tag: Special Administration

TIMMMBBEEERRRRRR….will the Government ever let Thames Water fall?

Posted on by Molly Allen
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By Dr Samir Seddougui, Campaign Researcher at River Action

I have recently been wading deep into the details of our legal action against the Government for failing to have a policy for when it will place Thames Water into special administration. Every now and then I would come across the phrase ‘Project Timber’ which piqued my curiosity. What could the Government be referring to when they use ‘Project Timber’ in internal documents? Digging around the Government website and several search engines yielded scant results. So I decided to conduct my own investigation.

It turns out that for over a year now, rumours have been circulating through the corridors of power (Parliament & the press) about the Government’s codename for its plan to put Thames Water out of its misery and into a special administration regime. This mysterious plan is called Project Timber. It was developed by the previous Government and was first mentioned in Parliament in March 2024. During a Parliamentary debate on Thames Water contingency plans, Richmond Park MP Sarah Olney said “what is currently a secret is Project Timber, which I understand is a contingency plan should Thames Water be unable to operate.” 18 months later and Project Timber is still a mystery.

The first thing that needs to be asked is why is there so much secrecy around this? What is the Government trying to hide? These questions are outside of the parameters of Freedom of Information (FOI) or Environment Information Regulation (EIR) requests, so instead I requested a copy of the Project Timber document or any internal documents that reference Project Timber. Defra came back to us with a rather confusing response.

It turns out Project Timber is so secret, Defra can ‘Neither Confirm Nor Deny’ its existence. They also argued that releasing information on Project Timber would threaten international relations and national security. What is so secretive about a contingency plan for a failing water company, that this Government won’t even admit whether it exists or not. With the ‘neither confirm nor deny’ a betting person would put money on Project Timber’s existence, which then leads to the question why doesn’t Defra want to make it public? But here’s the catch: how can something simultaneously not exist and pose a security risk if disclosed? It can’t be both.

Without transparency from the Government, we are left to scratch our heads and try to speculatemake some informed guesses about what Project Timber, is and why the Government is being so secretive about it. The metaphor of a falling tree having implications for the surrounding environment is not lost on me but rather ironic, given the current environmental impact from allowing Thames Water to continue to fail and pollute our rivers. “Timber” is usually a warning, but special administration would be a positive step for the water industry, which for decades has been getting rewarded for systemic failure across all metrics.

Special administration allows for a more sustainable ownership, financing and governance model guided by public benefit, not private profits. Transparency from the Government regarding their contingency plans for Thames Water would let the public understand and properly scrutinise their (in)action so far. This is why we are appealing the Government’s ‘neither confirm nor deny’ response, due to the weight of public interest on the matter. Afterall, it is the public who are most affected by this. Timber, the material, is solid, dependable and the backbone of many structures. Unfortunately the same cannot be said about Thames Water.

River Action is now urging the Government to provide much-needed transparency on when it will act. Yes, these documents might contain market-sensitive information but Defra could redact those sections while still making contingency plans and policies public. That would allow proper scrutiny and help to rebuild public trust in the water sector.

What do you think is in Project Timber? And why do you think the Government is holding back?….

Myth Busting: Would it really cost £100 billion to bring water utilities into public ownership?

Posted on by Molly Allen
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By Dr Samir Seddougui

Whenever the conversation turns to the cost of nationalising the water industry or even just exploring public benefit and ownership models instead of continuing with deep privatisation, the government references the scarily high figure of £90-100 billion to dampen public support. 

On 16 September, Defra released a short policy paper outlining the rationale behind its estimation that nationalising the water industry would cost approximately £100 billion. A similar number was reached in a 2018 Social Market Foundation report paid for by four water companies (Anglian Water, Severn Trent, South West Water and United Utilities). The Social Market Foundation’s estimation takes the RCV from 2018 which was estimated at £64 billion and then added premiums for acquisition, so presumably their estimation would be even higher now.

Defra based this on three assumptions that: 

  1. the value of Water Companies should be tied to their Regulatory Capital Value (RCV); 
  2. the government would absorb equity and debt; and 
  3. no discounts or premiums should apply. 

 

Inflated Economics? 

Let’s be clear: this isn’t rigorous economic analysis. It is a simplistic and unrealistic theory being relied on by the government to justify not taking decisive action in public and environmental interests by putting failing companies like Thames Water into a special administration regime. What it protects are investors and an unsustainable cycle of debt servicing. 

Professor Ewan McGaughey, professor of Law at King College London and co-author of the People’s Commission argues that public ownership is an inexpensive solution, contending that the true cost is closer to zero as a more accurate market valuation would account for performance and financial failures.

As Economics Professor Sir Dieter Helm puts it, Defra’s estimate is “misleading, simplistic and wrong”. In his analysis published on 22 September, Helm sets out why each of Defra’s assumptions is wrong and goes on to explain why special administration for a failing water company such as Thames Water would make sure the business continues on a sustainable basis, giving it “breathing space” before, the special administrator would “almost certainly achieve a price which is at a significant discount to the RCV” with debt holders taking a “haircut”. 

When valuing a utility company such as Thames Water, RCV is only one factor a buyer would weigh. Helm argues that a company’s failure to maintain assets and its debt levels are central to any realistic valuation. The People’s Commission notes that RCV ignores another glaring reality: water companies have extracted £83 billion in dividends to shareholders. Karol Yearwood at the University of Greenwich has described the privatised water industry as a “cash machine for investors”. Today, the biggest beneficiaries are historic shareholders and debt holders keen to cash in on the roughly £17 billion debt Thames Water has been allowed to rack up. 

Since privatisation 32 years ago, Thames Water has handed £7.2 billion pounds to shareholders, while neglecting essential upgrades leaving the public with failing pipes, sewage discharges, and degraded waterways.

Defra also glosses over Thames Water’s massive debt pile and fines including a record-breaking £123 million penalty this year for serious pollution that continues to devastate our rivers. Polluters should foot the bill, not taxpayers. Under a special administration regime, customer payments would flow to court-appointed administrators to fund the operation of essential water services, instead of being paid out to as returns to shareholders who would go to the back of the queue, making the process far less of a financial burden than Defra claims. In fact, as Helm points out, it would exceed the cost of running the business.

 

The cost of and case for special administration 

The Government says that special administration of Thames Water would cost the government £4 billion. This is also overblown: on Helm’s analysis, the Government should recover its costs from the sale of Thames Water which, when offered for sale, would receive bids way in excess of £4 billion. The net cost to the Treasury should be zero. 

Helm also explains why special administration is not nationalisation, as it is often misleadingly labelled or conflated as a tactic to avoid having to use it. Special administration is a regime designed specifically to deal with water company failure and it offers the most effective way out of the mess Thames Water is in.  It should not be feared but favoured.

Dieter Helm cuts through the noise: “What is needed now is for Defra to put Thames into special administration, instead of putting out simplistic and ill-thought-through “assumptions” to support an implausible, very big round number.” 

We are also pursuing a Judicial Review against DEFRA for failing to set out clear thresholds for when a company should be put into SAR. In our view, this failure breaches core public law duties and leaves rivers and communities at the mercy of failing operators. With 16 million customers, some ministers may believe Thames is too big to fail. River Action says it’s too big to be allowed to keep failing. It’s time to put customers and the environment before private profits – by putting Thames Water out of its misery and into a special administration regime. 

 

References

  • Becky Malby, Kate Bayliss, Frances Cleaver, Ewan McGaughey, “A fair price to the public for water nationalisation.” The Guardian. 3 August 2025. Accessed here.
  • Defra, “Nationalising the water sector: how we assessed the cost.” Policy Paper, 16 September 2025, accessed here.
  • The Social Market Foundation, “The cost of nationalising the water industry in England.” February 2018. Accessed here.
  • Dieter Helm, “The next episode in the Thames Water saga: Defra’s misleading £100 billion cost of nationalisation and flawed board vetting proposals”. 22 September 2025, accessed here.
  • Ewan McGaughey, “How to Clean Up Our Water: Why Public Ownership in Law Costs Zero”. Common Wealth, 5 June 2025, accessed here.
  • Kate Bayliss, Frances Cleaver, Becky Malby, “Defra and the £100bn”. The People’s Commission, 18 September 2025, accessed here.
  • Karol Yearwood, “The Privatised Water Industry in the UK. An ATM for investors.” University of Greenwich, September 2018, accessed here.
  • Tainted Water, “Where Your Money Goes”, Goldsmiths, University of London, 2024, accessed here.
  • Sandra Laville, Anna Leach, & Carmen Aguilar García, “In charts: how privatisation drained Thames Water’s coffers”, The Guardian, 30 June 2023, accessed here.
  • Sandra Laville, “Thames Water fails to complete 108 upgrades to ageing sewage works”, The Guardian, 10 July 2024, accessed here.
  • Environment, Food and Rural Affairs Committee, “Reforming the Water Sector”, House of Commons, 9 September 2025, accessed here.
  • Eleanor Shearer & Ewan McGaughey, “Deep Trouble: Fixing Our Broken Water System”, Common Wealth, 11 July 2024, accessed here.
  • Sarah Olney MP, “Thames Water: Contingency Plans”, House of Commons, 15 March 2024, accessed here.
  • Alex Lawson, “The fate of Thames Water hangs in the balance. So what are its options?”. The Guardian, 22 March, 2024, accessed here.
  • River Action, “River Action launches legal challenge against the Government over Thames Water failures”, 30 July 2025, accessed here.

MISSING: Policy for special administration (or is it?)

Posted on by Molly Allen
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River Action’s legal challenge

In July, River Action launched its legal challenge over the Government’s failure to explain when it will trigger special administration for Thames Water and other failing water companies because of breaches of their performance duties.

That same month, the Independent Water Commission also recommended that a clearer policy for special administration be adopted.

Our legal challenge is simple: we say that the Environment Secretary has acted unlawfully by failing to publish a policy on when they will ask the High Court to put a water company in a special administration regime – a mechanism under existing legislation designed to enable the government to take action to deal with failing water companies.

What is special administration for water companies?

Special administration is a legal process for companies supplying essential services like water that are failing in terms of performance, finances or duties. It allows the government via an administrator to step in and take temporary control, ensuring operations keep running while offering a clean break from unsustainable debt and chronic underperformance.

Importantly, a special administration regime prioritises public interest – customer service, environmental protection and infrastructure investment – instead of existing shareholders and debt holders. By redirecting funds away from private profits and towards urgent improvements, it offers a route to restructure and refinance a water company for public benefit and long term sustainability.

 The Government’s response

The Environment Secretary has now formally responded. Remarkably, it has been claimed again that a policy setting out the circumstances in which or the criteria by reference to which the Court would be asked to put a water company into special administration does not exist. The response simply states “There is nothing for the Defendant to publish”.

Evidence that a policy exists?

The Environment Secretary has maintained this position despite clear indications that a policy exists in some form. Most strikingly, in a recent Environment, Food and Rural Affairs committee hearing, the Minister for Water and Flooding was asked about the circumstances in which a water company would meet the threshold for special administration. She read out a “whole list” of thresholds that are apparently being used to determine whether special administration should be pursued by the government. This sounds remarkably like a policy; the very thing the government insists does not exist.

The Water Minister also said that “Thames Water has not met the threshold for special administration for going into special administration” on the “formal advice” she had been given.

Why transparency matters

Why is the government so reluctant to publish a policy on when it will use the regime specifically created to deal with water company failure? How much worse does it need to get at Thames Water before the government will trigger the process? The public has a right to know what policies and plans exist to protect bill payers, our rivers and the provision of essential water services.

This goes beyond Thames Water. It matters for the whole water sector. Having a clear policy on when special administration will be triggered means it will be seen as a credible tool that strengthens regulatory discipline, incentivises better water company performance and avoids political delays. This is crucial to restore public trust and provide certainty to investors. Everyone should know the rules and then they must be followed.

What next?

Now the High Court will decide whether to grant permission for our claim to proceed to a full hearing. In the meantime, River Action will continue to push for transparency around the government’s policy and plans for special administration when water companies fail – and for leadership when it comes to Thames Water.

River Action launches legal challenge against the Government over Thames Water failures

Posted on by Molly Allen
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River Action launches legal challenge over Government’s failure to explain when it will trigger special administration for Thames Water


We have filed a legal claim over Environment Secretary Steve Reed’s failure to explain when he will trigger special administration for Thames Water and other failing water companies – despite having the legal mechanism to take action, serious breaches by Thames Water, rising harm to customers and rivers, and calls from the Independent Water Commission for a clearer policy.

Our legal challenge is simple: we say that the Environment Secretary has acted unlawfully by failing to have or publish a policy on when he will use his power to ask the High Court to put a water company in the Special Administration Regime (SAR) – a mechanism under existing legislation specifically designed to enable the government to take action to deal with failing water companies.

This comes amid the deepening crisis at Thames Water, which has repeatedly breached environmental law, mismanaged its finances, failed to invest adequately in infrastructure, and shattered investor confidence and customer trust. Thames Water is on the brink of collapse with £20 billion in debt and widely regarded as no longer investable, with customers and the environment paying the price.

Steve Reed as Environment Secretary or Ofwat as water regulator (with his approval) have the power under section 24 of the Water Industry Act 1991 to ask the High Court to place a water company in special administration on either financial or performance grounds.

Special administration is a temporary insolvency and restructuring process for companies that provide essential public services like water, energy or transport. It is designed to ensure continuity of service while the company is stabilised and restructured. There is a bespoke special administration regime for the water industry, created in 1991 and designed to prioritise customers and services, putting financial interests second. Where water companies are failing, special administration can provide better, fairer and more sustainable outcomes – with the major benefit that it gives the water company the ability to recover and refinance with the opportunity for funds to be redirected away from investor profits towards the urgent infrastructure improvements needed to solve the ongoing sewage crisis, all without exposing its customers and at little cost to the public purse. Yet special administration has never been used for the water industry.

Thames Water has breached its duties and violated its licence conditions, seriously and repeatedly. It is the clearest possible case for special administration.

River Action’s legal challenge

The judicial review is concerned with the legal requirement for the Environment Secretary to have a policy for when he will trigger special administration for water companies. The claim challenges two key failings by the Government:

  1. Failure to publish a policy, breaching core public law duties.
  2. Failure to develop a policy at all, breaching obligations under the Habitats Regulations and other planning and environmental law.

Special administration is not limited to insolvency. It can also be used to protect customers and the environment when a water company is failing to meet performance standards. Our claim focuses on the Government’s approach to triggering a performance-based special administration process.

Under section 24 of the Water Industry Act 1991, special administration can be triggered by a water company’s failure to meet performance standards and a breach of its statutory or licence duties in ways that are “serious enough to make it inappropriate for the company to continue to hold its licence”. We believe that Thames Water clearly meets this threshold and has done so for years.

Independent Water Commission on Special Administration 

Last week, the Independent Water Commission, chaired by former Bank of England Deputy Governor Sir Jon Cunliffe said that “the policy around SAR assessment should be set out more clearly”.  The Commission also said that “SAR should be a practical option for the regulator and government” and stressed the importance of water companies preparing a plan for SAR now.

A route to public benefit models

We believe that special administration represents the most effective and immediate means of addressing the failures within the water industry. We see special administration as the first step toward meaningful and necessary systemic reform including providing the opportunity for a shift to a public benefit model of water ownership, governance and financing, of the type seen successfully implemented across Europe.

We are calling for the urgent use of special administration procedures for Thames Water as a tool to stabilise and reset using public benefit principles, with other failing water companies to follow as necessary.

Frequently Asked Questions

 

What is the Water Industry Special Administration Regime (SAR)?

The Water Industry Special Administration Regime (SAR) was introduced in England and Wales under the Water Industry Act 1991, with detailed procedures governed by the Water Industry (Special Administration) Rules 2009 and a comprehensive modernisation of the regime in early 2024. The legislative intent behind this regime is to protect consumers, public health and the environment in the event that a regulated water or sewerage company becomes insolvent (an insolvency SAR) or fails to carry out its statutory functions or licensed activities to such an extent that it is inappropriate for it to continue to hold its appointment or licence (a performance SAR).

An application for special administration of a water company may only be made by the Secretary of State or Ofwat with the Secretary of State’s consent. This contrasts starkly with normal administration under the Insolvency Act 1986 which can be applied for by creditors, the company or a director.

Special administration allows the Government to:

  • Appoint independent special administrators;
  • Restructure failing companies and their debt (the focus of an insolvency SAR);
  • Restore and maintain performance standards (the focus of a performance SAR);
  • Ensure water and wastewater services continue without interruption.

Importantly, the special administration regime is designed to keep services running using the company’s own revenues – from ongoing customer bills – not taxpayer funding. It is intended as a mechanism for accountability and  reform, not a bailout.

What are the details of the judicial review claim?

On 7 March 2025, we wrote to the Secretary of State for Environment, Food and Rural Affairs (“SSEFRA”) to ask whether the SSEFRA or the SSEFRA’s ministers had given consideration to whether it would be appropriate to exercise their discretionary power to apply to the High Court to have Thames Water placed into special administration in light of the contraventions of its “principal duties” in accordance with section 24 of the Water Industry Act 1991.

In response, the SSEFRA has refused to provide details of any such policy and has simply contended that there was no requirement to have a “written document or policy”.

Accordingly, we have three grounds of review:

  • Ground 1: Failure to publish a policy. The SSEFRA has a policy on the circumstances in which he will exercise his discretion pursuant to section 24 WIA and has acted unlawfully in failing to publish that policy.
  • Ground 2: Failure to have a policy. If, contrary to Ground 1, the SSEFRA does not have such a policy, that is in breach of Regulation 9(3) of the Conservation of Offshore Marine Habitats and Species Regulations 2017 (the Habitats Regulations).
  • Ground 3: Failure to have a policy. If, contrary to Ground 1, the SSEFRA does not have such a policy, that is in breach of section 85(A1) of the Countryside and Rights of Way Act 2000, as amended by section 245 of the Levelling-Up and Regeneration Act 2023.

We are seeking a mandatory order that SSEFRA either provides details of any policy or, if there is no policy, requires a policy to be developed and published.

Why does Thames Water need to be brought into Special Administration?

  • Persistent failures: Thames Water has a long record of breaching environmental, financial, and regulatory obligations.
  • Record fine: In May 2025, Thames Water was fined nearly £123 million by water regulator Ofwat for breaches of rules relating to its wastewater operations (£104.5 million) and breaches of rules relating to dividend payments (£18.2 million). This is the largest penalty Ofwat has ever issued.
  • Investor confidence collapsing: KKR, Thames Water’s preferred buyer, pulled out of negotiations leaving its various existing lenders as the only option.  Thames Water’s creditors have reportedly demanded that the company and its management be granted immunity from prosecution for serious environmental crimes as a condition of their restructuring proposals, without which Thames Water has said it would not be “investable”.
  • Inflated cost claims: The Treasury has claimed placing Thames Water into special administration could cost up to £4 billion – with reports it told DEFRA that it would have to meet these costs from DEFRA’s annual budget totalling £4.6 billion. Independent experts such as Professor Ewan McGaughey and Professor Dieter Helm believe the £4 billion figure is overstated and politically driven, with the likely costs being much lower and likely to be recouped by the Government on exit from administration.

 

What is the Independent Water Commission’s view on Special Administration?

On 21 July 2025, Sir Jon Cunliffe’s Independent Water Commission published its 88 final recommendations to the UK and Welsh governments for the reform of the water sector.

Two recommendations were made in relation to the special administration regime:

  • Recommendation 46: The regulator in England and Wales should continue to adopt an evidence-based process to consider, on a case-by-case basis, whether it would be appropriate for a water company to transition to an alternative ownership model where they request to do so or following a Special Administration Regime.
  • Recommendation 59: The regulator in England and Wales should develop and consult on a framework for ensuring companies are prepared for SAR.

In relation to Recommendation 59, the Commission said:

“793. The Commission believes the SAR should be a practical option for the regulator and government but that it should be very much a last resort. However well prepared, a SAR would be a major exercise which carries some risk of disruption to the company’s operation. The Commission notes that lowering the threshold for SAR would increase costs to customers through higher financing given the increased risk on investors. The Commission is also mindful of the risks in creating automatic triggers – experience in insolvency and similar regimes in other sectors, including financial services, is that conditions and circumstances of individual cases vary widely and cannot be anticipated. There is a need for broad, judgement based tests within a clear policy, that has been set out in advance, of how the regulator will assess failing companies against these tests, the factors it will take into account and the indicators it will consider. In the Commission’s view the two current tests for entry into SAR effectively balance objective and subjective factors and include an appropriate level of judgement.  It believes, however, that the policy around making the SAR assessment should be set out more clearly.

794. The Commission believes that further practical steps can be taken to ensure the SAR is a credible, but low probability, threat. In particular, as part of the SAR policy set out above, the regulator should develop and consult on a framework for ensuring companies prepare a plan for SAR. This should consider what the practical barriers to SAR might be, and how these can be mitigated in advance.”

Although the Commission’s recommendations focus on the regulator, its comments around the need for a clearer policy for special administration logically apply to both Ofwat as regulator and SSEFRA, as the two authorities with the power to petition the High Court for a special administration order.

Court of Appeal upholds Thames Water’s £3 billion rescue plan – “This decision is a disaster for Thames Water bill payers and the environment”

Posted on by Molly Allen
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WHAT HAPPENED?

The Court of Appeal has decided to uphold Thames Water’s £3 billion rescue plan. This is a devastating blow to both the River Thames and its millions of customers. Instead of prioritising urgent investment in tackling pollution and infrastructure failures, this bailout will see a third of bill increases swallowed by massive interest payments, as highlighted by River Action’s CEO, James Wallace:

“Customers will now have to pay the price for the failing water company with about a third of their increased water bills paying for massive interest payments while our rivers remain choked with sewage”

WHY WAS THIS RULING IMPORTANT?

Sewage continues to pour into our rivers, and Thames Water customers are left footing the bill for a broken, profit-driven system that has failed to deliver the basic services they pay for. This ruling effectively rewards financial mismanagement while leaving our waterways in crisis.

“This is not just about managing a crisis; it’s about fixing a broken system that has allowed private companies to profit at the expense of public well-being.”

WHAT HAPPENS NEXT?

River Action believes the Government must immediately place Thames Water into Special Administration to prevent further financial and environmental harm. Instead of propping up an unsustainable model, the independent Water Commission must propose a governance and financial framework that puts people and the environment first. This is not just about rescuing a single company, it’s about ending a system that has allowed private firms to profit while rivers die and communities suffer.

“Maintaining the status quo will only perpetuate this corporate takeover of the lifeblood of our economy and land. The government can and should step in now”

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