In a game of chicken, the first player to flinch loses. In the stand-off that has been playing out this year between Thames Water on the one side and regulator Ofwat and UK ministers on the other, the latter might be feeling triumphant. But they shouldn’t celebrate too soon. They have been pushing Thames, which had warned in September it could run out of cash by the end of the year, to find a market-led solution to its troubles. That now looks like a distinct possibility.
The alternative is a “slow death” if new owners once again fail to sufficiently invest in infrastructure and run the company efficiently. He is right to be cautious. If history is any guide, new owners often kick the can down the road. Thames is in this predicament for several reasons. But chief among them is financial engineering and insufficient investment by previous owners. So far there are relatively few details about what potential new equity investors might do with Thames.