Thames Water could hike customers' bills by 40%

Nationalisation also possible as £500m rescue plan fails

- HOLLY EVANS

Shareholders have backed out of plans to inject £500m of funding into troubled utility Thames Water, sparking concerns of a government bailout that could cost the taxpayer billions.

Chief executive Chris Weston, meanwhile, refused to rule out bill increases of up to 40 per cent for customers, as the firm struggles with increasing debts and huge interest payments. The beleaguered utility company revealed its shareholders had withheld the vital money because they say demands by regulators left its business plan "uninvestable".

Labour urged the government and regulators to "do everything in their power to stabilise" Thames Water, with Jeremy Hunt saying that the Treasury will monitor the situation "very carefully". While Mr Weston said the company would be able to cover its operating costs until next year, he admitted there was a "possibility" of the firm going into special administration if extra money is not invested.

When asked on Sky News if bills could be hiked to fill the gap, Mr Weston replied: "I don't think we have been at all secretive about that. But the plans that we have put forward - which are very much in accordance with what customers are asking us to do - require an investment of around £20bn in that 2025-2030 period, and that would result in a bill (increase) of around 40 per cent."

Meanwhile, the GMB union accused shareholders of "essentially blackmailing customers and Ofwat" ahead of a meeting with Thames Water yesterday morning.

GMB national officer Gary Carter said: "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.