Closing summary: Thames Water faces the ire of the government and its shareholders
Thames Water, the UK’s largest water company, edged closer to being taken over by the government on Thursday after its shareholders balked at the prospect of giving it £500m after the regulator refused to allow it to raise prices as high as they wanted.
The refusal to stump up the cash could mean that Thames Water is forced into special administration if it is unable to find new investment before its cash reserves run dry at some point next year.
The company’s chief executive, Chris Weston, said it is “a long way off” temporary nationalisation, but did not rule it out.
The debacle has raised questions about what Labour’s approach will be if – as generally expected – it wins a general election in the next year. Labour and the Conservative party’s Michael Gove said they do not want taxpayers or bill payers to pay the cost, but neither have so far backed nationalisation either temporarily or permanently.
In other business news today:
You can continue to follow our live coverage from across the world:
In the UK, Keir Starmer launches Labour local election campaign and defends ‘difficult decisions’ over dropped pledges
In US politics, a judge hears Trump attorney’s free speech arguments in Georgia election subversion case
In US news, Sam Bankman-Fried says ‘I am sorry’ in court before sentencing
In our coverage of the Russia-Ukraine war, Russia blocks renewal of North Korea sanctions monitors
In our coverage of the Middle East crisis, the US and Israel are in talks to revive Washington trip to discuss Rafah
Thank you for reading our live business coverage in this shortened week. Enjoy your Easter eggs and do join us again on Tuesday. JJ
Key events
BuzzFeed UK taken over by Independent owner
The owner of the Independent news website has taken over the UK arm of publisher BuzzFeed, in a deal that brings to an end the latter’s volatile time operating on its own in the UK.
The Independent will gain BuzzFeed Inc’s UK website, editorial staff and website technology as part of a long-term licensing deal.
BuzzFeed burst on to the UK media scene in 2013, and garnered large audiences – particularly among younger readers – with viral articles and “listicles”, before branching out into a respected news operation.
However, it struggled to convert its audience numbers into profits. In 2017 it cut back its workforce, before disbanding its BuzzFeed News UK team entirely in 2020. Last year it closed the US news team as well.
Under the deal the Independent, which has also faced financial problems that forced the closure of its print newspaper operation, will also take over HuffPost in the UK, food website Tasty, and Seasoned, a brand aimed at black British audiences.
The Unison union also wants the government to renationalise Thames Water to prevent jobs from being at risk.
It is unclear how many – if any – jobs are under threat. Cuts might be conceivable if the company decided to try to cut costs in the future, but for now it is insisting it is “business as usual”.
Donna Rowe-Merriman, Unison’s head of environment, said:
It’s clear the business model for Thames Water has failed and the company is unviable. Even Thames Water’s own shareholders refuse to keep it afloat.
Yet again, staff are facing an uncertain future with jobs at risk and no hope of much-needed investment. Customers will have to contend with poor water quality and rising bills.
This utter chaos is further evidence the government needs to renationalise Thames Water now.
The leader of the Liberal Democrats, Sir Ed Davey, has responded to Michael Gove’s anger about Thames Water. He said anger is not enough from the government.
The Lib Dems have been calling for special administration for Thames Water – a temporary nationalisation – for the last fortnight, arguing that it would keep bills down.
Davey told BBC Radio 4’s World At One programme (via PA) that the government, and communities minister Michael Gove, need to take action against Thames Water.
Davey said:
And it’s alright Michael Gove being cross, well where are the Conservatives in this? The Conservatives have failed to tackle this over all their time, and we really need now to get a grip of this.
People are fed up of this sewage problem across our country, Thames Water one of the worst examples of it, and they’re looking to the government to take some action.
Michael Gove: Thames Water leadership has been a ‘disgrace’
Thames Water must “carry the can” for the company’s management failings and not pass higher bills on to consumers, housing and communities secretary Michael Gove has said.
The company – and by extension its shareholders – have taken advantage of customers (who cannot switch provider from the natural monopoly) and have not invested enough he said in broadcast interviews. Via PA, Gove said:
I think the leadership of Thames Water has been a disgrace. I think for years now we have seen customers of Thames Water taken advantage of by successive management teams that have been taking out profits and not investing as they should have been.
When I was environment secretary I called this out. They haven’t changed their ways. I have zero sympathy for the leadership of Thames Water. In my own constituency I have seen how they have behaved in a high-handed and arrogant way towards the consumers who pay their bills.
So the answer is not to hit the consumers, the answer is for the management team to look to their own approach and ask themselves why they are in this difficult situation, and of course the answer is because of serial mismanagement for which they must carry the can.
US economy grew faster than first thought at 3.4% annual rate
The US economy grew at a faster rate than thought at first in the final three months of 2023, surprising economists who had not expected an upward revision.
US GDP grew by 3.4% in the final quarter compared to the same quarter a year earlier, according to the final estimate by the Bureau of Economic Analysis (BEA). That was up from the 3.2% measured in the second reading.
The BEA said the faster growth was thanks to upward revisions to consumer spending and non-residential fixed investment.
Reuters reports that the growth rate is well above what the Federal Reserve, the US central bank, would consider as non-inflationary – suggesting that more interest rate hikes could be ahead.
The economy is growing above what Federal Reserve officials regard as the non-inflationary growth rate of 1.8% and continues to outperform its global peers despite 525 basis points worth of interest rate hikes from the US central bank since March 2022 to quell inflation.
The ship that crashed into a Baltimore bridge, causing its collapse, radioed for help saying that it had lost all power, according to US government officials.
Investigators from the US National Transportation Safety Board have started to carry out interviews with crew on the ship during the disaster, which killed several people, including maintenance workers and people driving across the bridge in the early hours.
Reuters reported:
The pilot was heard calling for tugboat assistance several minutes before the crash, the first indication of distress to harbor officials, followed by a radio report that the ship had lost all power and was approaching the bridge, NTSB officials said at a news briefing on Wednesday night.
That account tallies with video of the ship which appears to show all of its lights flicking on and off before the impact.
UK’s Sellafield nuclear waste dump to be prosecuted over alleged IT offences
The Sellafield nuclear waste dump is to be prosecuted for alleged information technology security offences, the industry watchdog has said.
The Office for Nuclear Regulation (ONR) said on Thursday that it had notified the state-owned Cumbrian nuclear company that it would be prosecuted under industry security regulations.
The prosecution follows the Guardian’s revelations last year of multiple cyber failings at the vast site, part of a year-long investigation into cyber hacking, radioactive contamination and an unhealthy workplace culture at Sellafield.
You can read the full story here:
And you can read the original revelations, from the Guardian’s Anna Isaac and Alex Lawson, here:
Most of the pressure on Labour to back a permanent nationalisation of Thames Water, the UK’s largest water company, is coming from the left, both within the party and without.
If a Labour government were to take power in a general election, which will take place in the next year, then the pressure on it to address the problems facing the privatised water utilities would mount.
Green party MP Caroline Lucas, who plans to stand down at the next election, said that the UK should nationalise all of the privatised water companies in England and Wales. (Water companies in Scotland and Northern Ireland are controlled by the government.)
Investors can see the writing on the wall for #ThamesWater. Endless sewage, supply outages and no money to sort it out. It’s clear Thames Water cannot run this vital public service – none of these companies can. We need to bring them all into public ownership. @We_OwnIt
— Caroline Lucas (@CarolineLucas) March 28, 2024
And Labour Lord Sikka said the government should not give a “bailout” to Thames Water shareholders. Instead, it should let it go bust, then nationalise it, he said.
Thames Water shareholders not minded to proceed with promised £3.25bn investment to keep it afloat.
Want govt bailout, huge hike in customer bills after extracting billions in dividends.
Were dividends legal?
Let it go bust, nationalise at low price. https://t.co/r9wFEECVIT
— Prem Sikka (@premnsikka) March 28, 2024
The GMB union, which represents many of Thames Water’s workers, has accused the company’s shareholders of “essentially blackmailing” customers and Ofwat.
The investors have refused to invest £500m previously promised, because regulator Ofwat wants to enforce conditions that would hit their investments.
GMB said that the shareholders should follow through on the investment.
Gary Carter, GMB national officer, said:
Thames Water investors are essentially blackmailing customers and Ofwat.
Assets and infrastructure are falling apart – instead of putting the money in to fix it, shareholders are refusing to pay a penny unless bills are allowed to rocket.
Holding bill payers to ransom for costs after years of underinvestment is completely unacceptable.
Shareholders need to think again and invest in Thames and the 8,000 strong workforce who keep the company afloat.
The Thames Water investors were approached for comment.
Thames Water’s parent company, Kemble Water Finance, has said that it will be unable to repay a debt that comes due in April, underlining the financial difficulties faced by the water company.
The parent company has appointed advisers from turnaround consultant Alvarez & Marsal to handle negotiations with lenders and the holders of its debt. Thames Water’s complicated capital structure also means that debt related to subsidiary Thames Water (Kemble) Finance Plc will be affected.
The companies (which are controlled by a motley crew of sovereign wealth funds and pension funds) said:
Absent an investible proposition for the shareholders to provide new equity, Kemble Water Finance Limited (KWF) considers at the current time that it will not be possible to pay further interest payments and, unless an extension to the maturity of the facility is granted by lenders, it will not be able to refinance or repay a £190m facility which matures on 30 April 2024.
In light of the above, KWF and Thames Water (Kemble) Finance Plc intend to approach their lenders and noteholders and request continued support in order to provide a stable platform while they engage with all key stakeholders.
