Prime Minister Andy Burnham has reportedly decided not to place Thames Water into special administration immediately amid concerns over the potential cost to taxpayers, legal risks and practical difficulties.
Reuters reported, citing The Times, that Burnham had stepped back from an immediate move into the Special Administration Regime despite previously arguing that public ownership was the best solution for Britain's largest water company.
The Government declined to comment to Reuters, meaning the reported decision has not been formally confirmed by Downing Street.
Concerns raised over cost and legal risks
According to the report, officials have raised concerns about the financial, legal and logistical consequences of placing Thames Water into special administration.
Thames Water's management has previously estimated that the process could require around £2 billion of taxpayer support over 18 months to keep the company operating.
That figure is an estimate rather than a confirmed cost to the public purse, and the eventual financial consequences would depend on the structure and duration of any administration process.
Thames Water has around £20 billion of debt and supplies approximately 16 million customers across London and the Thames Valley.
Special administration not permanently ruled out
The reported decision does not mean special administration or public ownership has been permanently abandoned.
Reuters said the Government is continuing to examine whether a viable route into the Special Administration Regime exists, with that assessment potentially taking several months.
Special administration is a mechanism designed to ensure essential water services continue if a company can no longer operate normally while its financial future is resolved.
Burnham has previously supported bringing Thames Water into public ownership, making the reported delay politically significant even though no final long-term decision has been announced.
Creditors pursue alternative rescue plan
Senior Thames Water creditors are meanwhile pursuing a separate restructuring proposal intended to stabilise the company without placing it into public ownership.
The creditor group, operating as London & Valley Water, holds around £17 billion of Thames Water's debt and has proposed a ten-year transformation plan.
Reuters reported that the plan includes a proposed new board and could give the Government a so-called golden share as part of arrangements intended to avoid nationalisation.
Any rescue deal would still require regulatory and legal approvals, including agreement over the company's debt and capital structure.
Pressure over Thames Water's future
Thames Water has faced prolonged financial difficulties alongside criticism over pollution, sewage discharges, infrastructure investment and leakage.
The company's future has therefore become a major political issue, with ministers facing pressure to ensure continuity of water services while limiting the potential cost to taxpayers.
Burnham's previous support for public ownership created expectations that his Government might move quickly towards special administration.
If the reported postponement is confirmed, it would illustrate the practical difficulties facing ministers when turning that position into policy.
No final Government decision confirmed
Neither the Government nor Thames Water formally confirmed the reported decision to Reuters.
For that reason, Ayes To The Right is treating the claim that Burnham has shelved immediate administration as a reported development rather than a formally announced change of Government policy.
The confirmed position is that Thames Water remains heavily indebted, its creditors are pursuing a restructuring proposal and the possibility of special administration has not been permanently excluded.