The statement made by Emma Reynolds, the Secretary of State for Environment, Food and Rural Affairs, in the House of Commons on 16 June 2026.
Before I begin, let me say that this is a solemn day, as we remember our dear friend and colleague Jo Cox—I got to know her when we were living in Brussels in our 20s. I pay tribute to her formidable sister and their family for all their vital work to honour her memory.
I will make a statement regarding the position of Thames Water and the proposed recapitalisation package under consideration. This Government were elected with a clear mandate to clean up our rivers, lakes and seas, having inherited record levels of pollution incidents from water companies. Thames Water has underperformed for 15 years. It has regularly missed performance targets, it has unacceptable levels of serious pollution incidents, and the company is heavily indebted. This situation, which delivers poor outcomes for consumers and the environment, cannot continue.
To fix this, over the course of the past two years, the company has been undertaking a recapitalisation process to seek vital long-term funding. The Government have been clear throughout that any investor will need to have a credible and robust turnaround plan, the implementation of which must be monitored by regulators and must restore the company’s financial resilience and operational performance. Ofwat, with the support of Government, have been in discussions with the London and Valley Water consortium—a group of Thames Water’s creditors—regarding the terms of a proposal. On 6 March, the consortium presented its proposal for Thames Water to both Ofwat and the Government. Ofwat has been continuing its discussions with the consortium since then, and I wanted to update the House on the next stage of the process.
Ofwat is currently evaluating the consortium’s proposal and, as the independent regulator, is responsible for deciding whether to accept it. If Ofwat decides to accept the proposal, this would be subject to a public consultation and a court-sanctioned restructuring process. A recapitalisation process of this size is complex and will take time. As the Environment Secretary, I have several duties, set out in section 2 of the Water Industry Act 1991. These include protecting consumers, securing the proper delivery of water and sewerage services, and ensuring that companies can finance those services and that statutory obligations are properly carried out. Today, I can confirm that I have sent a letter to Iain Coucher, Ofwat’s chair, outlining my early views on the proposal linked to my section 2 duties. These should not be taken as, nor do they constitute, a direction from Government to Ofwat.
I do not believe that the current proposal goes far enough to protect customers and the environment. I have three particular concerns about the proposal: the unfair cost to customers, delays to vital infrastructure investments, and delays to environmental improvements. The 16 million Thames Water customers are front and centre of my consideration, and I am primarily worried about the impact on them. There is an expectation in the proposal that customers will fund—and therefore bear an undue cost for—investment in the company.
In addition, I am not convinced about the proposal’s request to reduce performance standards, nor about the significant delay to vital infrastructure investments. This would mean delays to environmental improvements, particularly those related to waste-water treatments linked to statutory requirements, as well as to projects that are important for drinking water safety and supply. I am therefore concerned that the long-term resilience of the water and waste-water systems may not be adequately protected. The Government will always act in the national interest, and my priority as Environment Secretary is protecting customers and the environment. We will stand ready for all eventualities.
I conclude by emphasising this Government’s commitment to turning around the water sector. In under two years, we have taken swift, decisive action. We have introduced the Water (Special Measures) Act 2025 to raise standards, enforce accountability, and make pollution cover-ups a criminal offence. We have banned more than £4 million in bonuses for polluting water bosses; we have unlocked £104 billion of private investment to rebuild vital infrastructure; and we have commissioned Sir Jon Cunliffe to lead the most comprehensive independent review of the water sector since privatisation. Together, those steps have paved the way for the landmark clean water Bill announced in the King’s Speech. The Bill fulfils the commitments we set out in the water White Paper earlier this year and will deliver the fundamental reforms that are so desperately needed. This once-in-a-generation Bill will create a single powerful water regulator, moving away from a system where water companies mark their own homework by putting in place stronger, active supervision. This will strengthen water companies’ financial resilience and the long-term stability of the sector, with modernised economic regulation and new powers to drive turnaround where companies perform poorly.
Additionally, the reforms will strengthen the consumer advocate, providing a more independent, authoritative voice that can challenge the system, drive improvements in outcomes and ensure that customers’ interests are put first. We will also improve water quality by cutting pollution at its source. Finally, we will avoid the situation we are discussing today happening again: our reforms will give the new regulator the powers to ensure water companies do not accumulate unmanageable levels of debt. More broadly, they will secure the long-term stability of the sector and ensure that companies are financially resilient. Put simply, our reforms will deliver better outcomes for customers and the environment.
I commend this statement to the House.