Andy Burnham is weighing changes to Thames Water insolvency law that would reshape the special administration regime (SAR) and, if enacted, clear a path toward the public ownership he has promised since taking office. The question is whether the legal architecture can be rebuilt quickly enough, and cheaply enough, not to make the promise look hollow.
The SAR has never been tested in practice. As Freshfields notes, the provisions were first introduced by the Water Industry Act 1991 and remained untested until the Water Industry (Special Administration) Regulations 2024 came into force on 12 January 2024. Those 2024 regulations introduced a new primary statutory purpose: rescue of the regulated operating company as a going concern, with transfer to another provider only as a fallback. That is already a tighter framework than critics of the old regime expected.
The problem Burnham faces is structural. Under the current SAR, administration can only be triggered if a company is insolvent or unable to deliver a basic level of service. Thames Water is neither, because a group of creditors has continued to fund it in the expectation of taking control themselves. And once administration is triggered, the administrator is legally obliged to maximise returns for creditors, not hand the keys to ministers at a discount.
The Thames Water Insolvency Law Problem the Creditors Are Counting On
Those creditors are not passive bystanders. According to Reuters, institutions holding £17 billion of Thames Water’s debt have proposed installing four named individuals to the company’s board, conditional on approval of their turnaround plan. In June 2025, that group offered to inject £5 billion in new funding, comprising £3 billion in equity and £2.25 billion in additional debt, alongside write-offs totalling approximately £6.7 billion from roughly £16 billion of senior debt.
Ofwat raised concerns that the plan’s initial debt write-down of around 20% fell short of the 30–40% the regulator believed would be needed to restore investment-grade credit ratings. That gap is unresolved. But the creditors’ position is clear: they have a plan, they have lawyers, and many of them are US-based hedge funds with a proven appetite for litigation.
The High Court sanctioned Thames Water’s interim restructuring plan on 18 February 2025, according to S&P Global Ratings. That plan, as Paul, Weiss describes it, was conceived as a liquidity bridge, not a permanent fix. The full restructuring that was supposed to follow has not materialised, which is precisely why Burnham’s team is now examining whether legislation can change the rules of the game.
A Bail-In Mechanism and New Environmental Triggers
The legislative proposal being developed by Labour backbenchers Helena Dollimore and Andrew Pakes, alongside the Good Growth Foundation, centres on amending the upcoming water bill. The amendments would introduce lower financial thresholds as new triggers for special administration, add environmental metrics as grounds for intervention, and create a bail-in mechanism modelled loosely on the post-financial-crisis bank resolution framework. Shareholders and creditors would absorb losses first; regulators, not courts, would run the process to accelerate it.
Praful Nargund of the Good Growth Foundation argued that ‘by putting emergency legislation in place now we can avoid litigation and ensure the special administration regime protects taxpayers, employees and customers from paying the price for shareholder failure.’ Andrew Pakes was blunter about the underlying tension: ‘The challenge is stopping Thames driving the cost of a SAR up through legal challenges and making sure the costs are fairly represented.’
I’d argue that is the crux of it. The creditors know the timetable as well as the government does. A source close to them was explicit: changing the law to force Thames into special administration ‘would be unprecedented and have an extremely negative read across to other struggling water companies’ and ‘will only result in litigation and the transfer of huge costs and risk to customers and taxpayers, while irretrievably damaging investor confidence in UK-regulated sectors.’
That is a threat dressed as a warning, and it should be read as such. But it is not an empty one. Amending the SAR to introduce new triggers or to water down the market-value safeguard that protects fixed-charge holders (a change the 2024 regulations already began to probe, according to Greenberg Traurig) will invite judicial review. A government with a large majority can pass legislation; it cannot legislate away a creditor’s right to challenge that legislation in court.
Burnham may yet get his 10-year public ownership project. But the SAR is not a roadblock that a bill removes overnight. It is a litigant’s charter, and the people holding Thames Water’s debt have every incentive to use it. The real test comes the moment the water bill reaches committee stage and the creditors’ lawyers start counting amendments.
