The government has objected to a proposed rescue deal for Thames Water, in a move which takes the UK's largest water company a step closer to a form of nationalisation.

Environment Secretary Emma Reynolds wrote to the industry regulator on Monday (15 June) to raise concerns over the £10bn package put forward by the firm's lenders.

Fears the company could collapse first emerged three years ago.

Reynolds said the deal does not do enough for consumers or the environment, but Thames's creditors said its plan was "the fastest route" to improving the firm's performance.

If the company does go bust, households will still have drinking water and sewerage services.

Thames Water — which serves about 16 million customers, mostly across London and parts of southern England — has faced heavy criticism in recent years over its performance, sewage discharges, and pipe leaks.

In May last year, it was handed a £122.7m fine, the biggest ever issued by the water industry regulator Ofwat, for breaching rules on sewage spills and shareholder payouts.

A group of its existing lenders has offered to write off £9.4bn of its near £20bn debt pile and inject billions in new money, but want leniency from future pollution fines in return.

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London & Valley Water (L&VW), a consortium of large financial institutions and investors, said some £3.35bn of cash would be put into the company along with a new £6.55bn debt facility. It would be part of a £10bn business plan until 2030.

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