Whitehall row over costs if Thames Water nationalised

Whitehall officials have been at loggerheads over the fate of Thames Water since the Treasury told the environment department that it would have to meet the cost of a multibillion-pound temporary nationalisation.

- Anna Isaac

Britain's biggest water company recently came within days of running out of money. Thames is in a desperate race to find a buyer willing to inject cash, with the US private equity firm KKR in pole position.

However, should that takeover fail, the heavily indebted utility could collapse into state hands via the special administration regime (SAR).

Existing budgets at the Department for Environment, Food and Rural Affairs, which insiders describe as already stretched, would have to be used to keep Thames Water afloat if bids to save the company fail, according to sources.

That pressure to find a private sector solution rather than a state rescue is helping to force through KKR's bid uncontested, with potential long-term challenges and associated costs not being given serious consideration, sources close to the bid and Whitehall insiders have said.