Episode 5: Thames Water in the Hot Seat

0:10Lucy Tobin: This podcast is brought to you by the National Anthem of the National Anthem of the National Anthem.

0:29Lucy Tobin: pressure. Hundreds of thousands of properties are already at a high risk of flooding. And that matters because of the impact. Homes can get damaged, streets closed, trains stop, and people's lives can be disrupted with very little warning. In December 2025, days before Christmas, this happened in the small Hertfordshire district of Rye House, some 20 miles north of central London. A burst sewer turned the railway into a river.

1:03Lucy Tobin: This is Thames Unfiltered from The Standard, in association with Thames Water. I'm your host Lucy Tobin, business journalist and author. Across the series we're asking how healthy the Thames really is, who shapes it, who's responsible for it, and what needs to happen to safeguard its future. So far, we've looked at the river, the science, the sewage system and the infrastructure built to protect London. Today, we look at Thames Water, the company responsible for much of the region's water and wastewater network. A company under pressure from customers, politicians, regulators and creditors. Later, I'll be putting questions directly to Catherine Ross, Thames Water's Strategy and External Affairs Director.

1:56Lucy Tobin: But first, to Rye House in Broxbourne, Hertfordshire. A few days before Christmas, this small commuter station was suddenly making headlines for all the wrong reasons. I'm Lewis Cockin, I'm the Member of Parliament for Broxbourne. Lewis was on his way back from Parliament on 17 December when he heard his local train station, Rye House, was flooding with sewage.

2:28So I got there about midnight, coming back from Parliament. The whole of Rye House train station was essentially underwater. I mean, it was like a river.

2:41Lucy Tobin: The flooding was coming from a burst rising sewer main on Rye Road. Scrolling through social media, at first glance it looks more like a fast-moving river than a railway station. The overhead lines are almost the only thing that gives it away

3:02Lucy Tobin: The sheer volume of water is down to the type of pipe that bursts Unlike most gravity sewers, a rising main pumps sewage under pressure So when it bursts, the outpour is usually faster And the consequences more severe We've got litres and litres of raw sewage going all over the local road, all over the train station. I mean, the noise was just continuous. And obviously, it's right next to the New River and the River Lee. So there was a real concern that we're going to have raw sewage just going to the waterways. Thames water engineers installed temporary pipes above ground to redirect the flow and fix the pipe.

3:46They managed to stop the flow after about 48 hours. But it took them ages to get rid of all of the raw sewage that was sent on the tracks all over the road. And to be honest with you, we've only just got the road back open now. That just goes to show the scale of the problem.

4:02Lucy Tobin: We put this to Thames Water. It says its teams worked round the clock with Network Rail to contain the flooding and restore services as quickly as possible. But the flooding damaged the signalling system, stopping all trains to Hertford East in the run-up to Christmas. Everyone's trying to do their Christmas shopping Everyone's trying to get in and out of London And essentially we were just left for a couple of days Without really any way to get in and out And then there's the parts Lewis finds hard to accept And they just didn't seem to be any sort of urgency from Thameswater And what really annoys me about them Is they send you your water bill Your water bill goes up And then they can't resolve things like this really quickly which then obviously we as the taxpayer will be paying more in our water bills to Thames Water to be able to cope with it because they just didn't deal with the situation properly.

5:00Lucy Tobin: For Lewis Cocking, Rye House is not only about one burst sewer. It's part of a wider frustration with Thames Water, a company asking customers to pay more while letting down Londoners. That's according to leader of the Liberal Democrats, Ed Davey.

5:27Water bills had never been raised to me on the doorsteps before, when I go knocking on doors. It's now one of the first things that gets mentioned. By the way, my wife complains about the water bill.

5:37Lucy Tobin: In 2020, the average water bill in the Thameswater catchment was£403. This financial year it's set to be£658 And the rises are not over By 2030 the average Thames Water bill is due to be 35 % higher And that figure is capped by the regulator Ofwat Thames Water says the money is needed To replace ageing and often leaky pipes To install over 1 million smart metres And upgrade sewer systems to reduce pollution But for many customers, the question is blunt. Why are they being asked to pay more now for a system they feel has already failed them, and in some cases, flooded them? I don't think the 16 million customers of Temmers Water should be the ones who cough up.

6:32It should have been the people who made these bad investments who should be facing the bills, not us. People who've experienced sewage flooding in their own homes, where their toilets are backed up and they've had sewage on the floor because the drains haven't been working. And then they get a bill that's saying they've got to pay hundreds of pounds more. I mean, come on. There's something seriously wrong with the system.

7:01Lucy Tobin: In February 2025, Thames Water launched an appeal against Offwatts' decision to cap their bill hikes at 35 % over five years. It argued that a 53 % increase was necessary for improving infrastructure. However, that appeal was paused after Thames Water secured£3 billion in emergency funding as it tried to stabilise its finances. Thames really is in a dreadful place financially. Thames Water's got itself into huge debt.

7:42Lucy Tobin: Then came another flashpoint. After securing its funding in February 2025, Thames Water announced what it called a retention scheme. 21 senior executives were in line for payments worth up to£18.5 million Thames Water said the payments were needed to keep its top people in post during its financial restructuring But to critics, it looked like rewards for those at the top of a company that's the UK's worst rated utility Anger erupted in many corners, including Ash Smith from Wasp

8:25there's been no competition the competition has all been about how much money can we extract how much money can we pay ourselves those ludicrous bonuses that the water industry says you have to pay to get the right standard of chief executive and they've had the right standard of chief executive apparently for thames water for the last however many years and they've driven the company off a cliff and they're now using that cliff hanging situation to blackmail the government into making customers pay even more for it.

8:55Lucy Tobin: Thames Water's first round of bonuses, paid in April 2025, gave some senior managers cash worth 50 % of their salaries. The remaining payments were blocked by Ofwat after the government introduced a new law banning unfair bonuses for water companies that don't meet the standards. bills flooding compensation sewage debt executive pay these are now the questions surrounding Thameswater so I went to quiz one of the bosses inside it Catherine Ross is Thameswater's strategy and external affairs director Her job is to explain Thameswater's position to regulators, politicians, the media and customers.

9:47Lucy Tobin: I had quite a few questions to ask her.

9:55I am Catherine Ross. I am Director of Strategy and External Affairs here at Thameswater.

10:01Lucy Tobin: The statistics we keep hearing about Thames Water are£20 billion debt, the most heavily indebted water company in England, whilst£10 billion has been paid out in dividends since privatisation. Part of the problem you've got those challenges and the ageing infrastructure now is that in the past, instead of using funds to fix the pipes and fix the problems, it was paid out to investors. I don't think it's that simple. So if you think back, to where the water industry was before privatisation, we were all owned by local government. We were municipally owned. And for that period of time, and I'm going back to the sort of, you know, 60s, 70s, 80s, there is absolutely no doubt that even then, pre-privatisation, this was a sector that was starved of investment.

10:51And so even at the point of privatisation, we had very old assets. And in fact, one of the driving forces for privatisation was precisely because the government realised that the sector needed an enormous amount of investment and it took a decision that that investment should come in the private sector rather than from the public sector. Now, since privatisation, I think there has been too much focus on keeping bills down for customers. I understand why that's an important thing to do and I understand why customers who are feeling pressures on cost of living from not just from water bills, but from energy bills and food bills and everything else, they're keen not to pay more than they have to.

11:29But that focus on low bills has basically starved the industry of the investment that it needs.

11:34Lucy Tobin: I would argue that instead of placing the burden of paying higher prices on customers, we should be looking at the£10 billion that was paid out to investors. That£10 billion could have been put to a lot of good use in the network, fixing the pipes, improving the sewage system. I can understand why you say that. I think it's important, as you acknowledge, to realise that If you do have private finance coming into a business, it does need to make a return on the money that it gives that business. 10 billion is a big number, but we're a big company. We have assets worth 22 billion pounds and we turn over 2 billion pounds a year.

12:08So 10 billion over the past 30 years, it's not as enormous a number in percentage terms as it looks when you talk about it in absolute terms. If you go back to the Macquarie era, the kind of returns they were making in percentage terms weren't unusual across the water sector. Now, with the benefit of hindsight, could some of that money have been reinvested? Quite possibly. But what Macquarie was doing in respect of Thames wasn't unusual at the time. To some extent, the past is in the past. The most important thing for us and for our customers and for the people who use the Thames is to make sure that we improve the business and we actually improve our performance for customers.

12:47We deliver more for the environment and we invest in the resilience of our assets going forward. And that's what we're trying to do.

12:53Lucy Tobin: I mean, a year ago, Hemswater was hit with a record£122 million fine, including a first of its kind£18 million fine specifically for breaching rules on shareholder dividend payments. Customers will be saying, you're still trying to pay out large dividends to investors when London's leaking infrastructure is in crisis, bills are soaring and you know looking for bailouts from the government how is that acceptable? So you are right we were fined by Ofwat for paying what Ofwat saw as a dividend that money did not go to Thameswater shareholders that money was actually used to pay interest on on debt and as is the case you know we all know if we don't pay interest on our debt then that that causes bigger problems but it wasn't actually a return to shareholders.

13:44And in fact, Thames Water shareholders haven't taken any money out as shareholders since before 2017. But for the last decade, they haven't seen a return. And that's the problem because it means when we need to ask them for more finance to do more investment, to deliver more of the things that customers and the environment care about, it's quite difficult to make that case to investors at the moment.

14:05Lucy Tobin: Yeah. But how can you look customers in the eye and ask for a 35 % bill increase when And they're going to say, you know, why don't you go back to Macquarie? Yeah, I understand that it is hard to ask customers for big bill increases. Customers are feeling pretty hard pressed right now. But I think, you know, we do talk to our customers. And one of the things they tell us, you know, more than anything else is that they care deeply about the reliability and the quality of the services we can provide. And they do understand that we have ageing assets. We have a growing population. We need to do more for the environment.

14:39and that costs money. I think what customers really want us to do, and this is what we're trying very hard to do at the moment, is to be really transparent and clear and honest with customers about where their money goes. So, for example, you know, one pound from a customer today that they give us through the bill, 55 pence of that goes directly into investing and improving our assets. And another 37 pence goes into operating those assets. So, if we can explain to customers how we're using their money wisely to deliver the stuff they care about. They might not love the bill increase, and I completely understand that, but they do appreciate where their money is going.

15:18Lucy Tobin: Is there a trust issue though? I mean, when Tenswater was privatised, it had zero debt. Today,£20 billion debt, a crumbling network, it's leaking 20 % of its water, a record for sewage dumping that's become a national scandal. Why should the public believe that more of their money via higher bills is the solution rather than a total change in ownership and management? Well, we could talk about some of those statistics and some of those public perceptions in a second. But if you want to talk about ownership, it's an interesting question. So, I mean, I do understand why, as a matter of principle, some people have the view that essential public services should be owned by and provided by the government.

16:02It's not a view I share, but I understand why some people think that as a point of principle. What I would say is given where Thames Water is at the moment and given the amount of investment that we need to make, if we were owned by the government, if we were sitting on the government balance sheet, all that investment would still have to be made and it would end up being funded via the public sector rather than via the private sector. And that has an opportunity cost. So the money that would be put into the water companies wouldn't then be available to go into education. It wouldn't be available to go into healthcare.

16:35And we would have to get in a queue behind education, healthcare and defence in order to secure that funding. And if our history tells us anything, it's that that funding isn't always forthcoming. And you can see what happened when we were state-owned before privatisation. So I certainly don't think nationalisation is a solution to the challenges that we face, though I can understand why some people feel that we should be owned in the public sector as a point of principle.

17:02Lucy Tobin: In April 2025, Thames Water paid out£2.5 million in retention payments to 21 senior managers. That was part of a wider£18.5 million package through to 2026, while the company was and still is in urgent talks to avoid collapse. The government's moved to ban unfair bonuses for companies that fail environmental standards, but Thames Water has tried to use retention payments to bypass those rules. How can you justify paying out these millions in bonuses or retentions? We will absolutely comply with Ofwat's rule on bonuses and remuneration. So there is absolutely no intention not to comply with that.

17:44We will absolutely comply with that rule and we'll demonstrate that compliance to the regulator. In respect of the retention payments, the second point to make is, as I think our chairman said to the select committee when he appeared there last year, that retention plan is paused. It remains on pause and no further payments have been made under that retention plan.

18:13Lucy Tobin: Catherine says that current management is still trying to fix the mistakes of its predecessors. But does Thames Water really have Londoners' best interest at its heart? And what about the health of our river?

18:36Lucy Tobin: I was going to move on to talk about the public perception of pollution. Thames Water is the only one-star rated water company in the country. Is that because of London's geography or is it that Thames Water is the worst managed utility? Oh, well, I don't think it's either of those two things. So when the Environment Agency rates water companies, they do so against a number of different criteria. And some of those criteria take account of the size of a company, and some of them don't. So for example, one of the criteria that the Environment Agency uses is serious pollutions. So Thames Water will always have more serious pollutions than any other water company because we're four times bigger than other water companies.

19:22And yet the Environment Agency measures serious pollutions in absolute terms. So we are likely to come off looking particularly bad on serious pollutions compared to other companies. And the star rating system is a comparative system. What I do think is really important though, Lucy, is we are a one-star company and we are not happy being a one-star company. We don't want to be a one-star company. We desperately want to improve our delivery for customers and for the environment. We're working really hard. If you look at our pollutions so far this year, they're roughly 20 % down on pollutions last year.

19:59We're putting a lot of effort, for example, not only into investing in our sewage treatment works, where we're investing billions in the next five years, but we're also thinking about the network, the sewers themselves, and making sure that there's no leakage from those sewers, and making sure that blockages that cause something like half of the pollutions that come out of our network are properly kept on top of, then we're also trying to work with the public and educate people and give them other options so that they don't put the wrong things down the loo that ends up causing pollutions from our network.

20:31So, you know, I don't want you to get the impression that we're happy being one star. We're really not. We're also investing an enormous amount in more monitoring. You'll probably be aware that we were the first water and sewage company to publish our discharges on a live map. So you can see where we're not hiding it. You can see when there is untreated sewage going into rivers.

20:52Lucy Tobin: We can see the poo arriving. I've had a good look at the map. But it's still to me, and I think to millions across the UK, it isn't right that in a developed country, you wouldn't expect to have to go on a website and check if there's poo in the water before you consider going, you know, in the areas that are identified as safe to swim. They might not be because there's been a dumping this day. You know, most days, sewage is being dumped into the Thames. Is that acceptable? Well, Lucy, let me just put a few facts on the table here. The idea that we are, quote unquote, dumping sewage day in, day out, for hours and hours and hours and hours and hours, you know, everywhere across our network, It is not right.

21:35We collect and treat 5.1 billion litres of wastewater every single day. And 99.45 % of that is treated and returned to the environment in line with the requirements on us through environmental regulation.

21:52Lucy Tobin: 0.5 % of billions of sewage is still quite a lot. And Lucy, I do accept that the public view, quite understandably, is that any discharge of untreated sewage into a river is unacceptable. And I think we were, again, one of the first companies to come out and say, yes, we acknowledge that, we accept that. But if we're going to address that, that is a very long-term program of really serious investment. because the way that this system was designed is that when the sewage treatment works is overwhelmed rather than have sewage back up through your loo basically the sewage treatment works discharges that sewage untreated into the river now that is how the system was designed and if we're going to address that we have to systematically increase the capacity at all of our sewage treatment works and and this is really important we have to work with others in the catchment to make sure that they aren't placing an undue burden on the sewage treatment works, for example, by misconnecting drains into sewers so that rainwater is going through the sewage works when it shouldn't be, reducing the amount of impermeable paving that again creates runoff that ends up going through the sewage treatment works.

23:07So if we are going to achieve what the public wants, which is quite understandable, which is no discharge of untreated sewage into rivers, It is a massive, massive rebuilding and re-education.

23:18Lucy Tobin: And what about on leaking? I think you lose 600 million litres of water a day through leaks. And obviously at the same time, summer's coming, we all await warnings about water shortages and hosepipe bans. Isn't part of that shortage actually a failure of Thames Waters plumbing? We have a plan over the next 25 years to make sure that we can provide enough clean, wholesome drinking water for our customers. And roughly over that 25-year period, we need a billion litres more every single day in order to keep customers supplied. So, we provide 2.6 billion litres a day to our customers at the moment, and we'll need to provide 3.6 billion litres in 25 years' time.

24:04Now, if we're going to keep those customers in supply over the next 25 years, 80 % of how we close that gap, 8-0, comes from reducing demand. And a big part of that reduction in demand is actually addressing leakage. There will never be zero leakage because our pipes have joints in them and those joints sit in soil and soil moves and there are vibrations and those joints pull apart and then they close back up again. So there will always be some level of leakage, but we do need to focus on getting that down.

24:35Lucy Tobin: Catherine Ross from Thames Water, thank you very much. Thanks, Lucy. Good to talk.

25:08underinvestment.

25:09Lucy Tobin: While Thames Water itself has warned us that cleaning up the River Thames will take years of serious investment, as well as defending the billions of pounds of dividends that the company has paid out to shareholders.

25:25Lucy Tobin: This is Thames Unfiltered by The Standard, in association with Thames Water. Next time on Thames Unfiltered in our final episode I'm going to look at the River Thames of the future How is climate change and population growth expected to impact this vital waterway and what are the potential consequences of apathy on the River Thames

25:58Lucy Tobin: This podcast was produced by The Standard and Message Heard in association with Thames Water with all content created under The Standard's editorial control. I'm your host, Lucy Tobin. From The Standard, Tori Frost is our executive producer and Vanessa Cutt is our senior project manager. From Message Heard, Mark Kendrick is our senior producer, Will Aspinall is our producer, Martha Tipper is our assistant producer. Lizzie Andrews and Alan Lear are our audio engineers. And James Cox is our production coordinator.