The Government has appointed insolvency specialists to step up planning for Thames Water in case the troubled water company collapses.
FTI Consulting has been brought in as an administrator in the event Thames fails to secure funding from lenders.
Contingency plans could see Britain’s biggest water firm placed into a special administration regime (SAR), meaning it would be put into an insolvency process.
Environment Secretary Steve Reed signed off the appointment, which would still need to be approved in court, according to Sky News which first reported on the move.
A spokeswoman for the Department for Environment, Food & Rural Affairs (Defra) said: “The Government will always act in the national interest on these issues.
“The company remains financially stable, but we have stepped up our preparations and stand ready for all eventualities, including applying for a special administration regime if that were to become necessary.”
Thames Water, which has 16 million customers, remains locked in talks over a rescue funding deal with a number of senior creditors.
But it recently raised doubts over whether the creditors’ refinancing and restructuring plans could be completed, which could ultimately result in a state rescue deal.
Bosses nonetheless said they had seen “good progress” over the potential deal, with hopes it could be completed by the end of the year.
In June, private equity firm KKR pulled out of plans to inject around £4 billion of cash into the financially-stricken company in a bid to keep it afloat.
Thames Water chairman Sir Adrian Montague recently said the firm was still in “crisis mode” as it seeks to avoid special administration measures.
The company recorded a pre-tax loss of £1.65 billion in the year to the end of March, while overall net debts swelled to £17.7 billion.
A spokeswoman for Thames Water said: “Our focus remains on a holistic and fundamental recapitalisation, delivering a market-led solution which includes targeting investment grade credit ratings and returning the company to a stable financial foundation.
“Constructive discussions with our many stakeholder continue.”
FTI Consulting has been contacted for comment.
Liberal Democrat MP Charlie Maynard said the party had been “warning the Government for months that the only option to get a grip on Thames Water at this point is to put it into special administration”.
“Special administration will allow debt to be written down so more money can be spent on cleaning up the sewage in our lakes and rivers,” he said.
“The final whistle needs to be blown on Thames Water and we need a new, capable regulator in place as soon as possible.”
Ministers are planning to dissolve Ofwat in a major regulatory shake-up for the water industry.
The Government announced the move last month as part of its response to public fury over rising bills, sewage pollution and large bonuses for bosses.
The water regulator may not be formally axed until at least 2027, with the process to overhaul the current system likely to be complex.
