Thames CEO: Crisis is decades in the making
MPs then turn to the BBC’s recent (revealing) documentary into the Thames Water crisis.
Q: Why did CEO Chris Weston tell the BBC that “I won’t know how it got this way”, after 10 months at the company? What’s his analysis today?
Weston replies that he has a pretty clear idea now, and was also pretty clear then, but questions the value of “talking about it publicly and pointing the finger” [in which case, why allow TV cameras into the company?!].
Weston tells the EFRA committee there are “many authors” responsible.
He says:
I’m clear how we got here. This has been decades in the making, the crisis we face at Thames.
I think all actors had a role to play in this.
Absolutely, the company and management has got something wrong. Five chief executives in five years is not a recipe for success, and I would argue consistency in leadership is a very important part of what we need to do now.
But, Weston also takes aim at the UK’s regulatory regime, saying it is flawed.
Regulators need to attract investment into the sector, and allow companies who are in trouble to turn around and improve – Weston argues that it doesn’t do that at the moment.
Key events
The drop in US inflation in April suggests that the tariffs are yet to feed through to inflation, says Seema Shah, chief global strategist at Principal Asset Management, adding:
Yet, it is questionable whether or not today’s CPI print really moves the needle after the rollercoaster ride of the past month. After all, not only is the April CPI report unlikely to have fully captured the tariff impact post-Liberation Day, but inflation numbers will now be further whipsawed by the US/China trade truce announcement.
An inflation impulse will likely come through during late Q2, but may be partially and quickly eroded if container traffic rapidly resumes in light of the drop in US/China tariffs. The implication is that a clear read on the inflation trend won’t be visible for several months yet. This prolonged inflation uncertainty likely implies a prolonged Fed pause. “
Donald Trump will be pleased to see inflation has managed to ease slightly in the US, says Lindsay James, investment strategist at Quilter.
But the US is “far from out of the woods” when it comes to inflation, James adds:
The first quarter of the year saw businesses ramp up their inventories as they looked to stockpile ahead of ‘Liberation Day’. As such, price rises are very much delayed, and we can still expect inflation in the US to spike because of these policies. This is, of course, why the Federal Reserve is reluctant to cut interest rates at this point.
The reprieve for Chinese goods will likely lead to some more re-stocking before the end of the 90-day period. But while tariffs are much reduced since yesterday, they remain markedly higher than before the 2nd April. The ‘Art of the Deal’ means no-one knows how permanent these tariffs may become, if at all, or if they will be reintroduced in a less harsh form. However, businesses will become increasingly wary of the shifting sands beneath their feet as these deadlines approach. Given we are already almost at the halfway point of Trump’s 90 day pause for the ‘reciprocal tariffs’ on other nations, we may soon see them building in more margin through price rises to protect themselves from sudden changes in policy making.
Tariffs are not the only thing weighing on inflation either, however, and there remain some other underlying factors that aren’t changing as quickly. Food prices in the US remain elevated despite Trump’s campaigning to lower those pressures for consumers.
Today’s inflation figure may paint somewhat of a sanguine picture, but scratch lightly under the surface and it is clear the US faces a number of risks. With economic growth slowing at the same time, the Fed is left in a bind of where to go from here. Risk of policy misstep, therefore, is growing and as such market volatility remains very much on the table.”
US inflation drops to four-year low
Newsflash: US inflation was lower than expected last month, despite fears that tariffs will push up costs.
On an annual basis, US consumer price inflation fell to 2.3% in April, down from 2.4% in March, the lowest reading since February 2021. Economists had expected the rate would be unchanged.
This might cheer Donald Trump, and bolster his claim that he is easing the price pressures hitting US households.
The Bureau of Labor Statistics (BLS) reports that food prices rose by 2.8% over the year, while energy prices were 3.7% cheaper than a year ago. Shelter (housing costs) rose by 4% year-on-year.
During the month, prices rise by 0.2% in April, having dropped by 0.1% in March.
The BLS says:
Indexes that increased over the month include household furnishings and operations, medical care, motor vehicle insurance, education, and personal care. The indexes for airline fares, used cars and trucks, communication, and apparel were among the major indexes that decreased in April.
Heather Stewart
The Bank of England’s chief economist, Huw Pill, has underlined his concerns about wage growth, suggesting it might mean rates have to stay higher for longer.
Speaking at a conference at the London School of Economics today, he said he was concerned about the upside risks to inflation, which might get stuck above the Bank’s 2% target.
Pill said that could, “mean that the response of monetary policy, in order to ensure that we get back to our target within a reasonable cycle, needs to be somewhat more aggressive or more persistent in itself.”
Jaguar Land Rover has welcomed the US-UK trade deal announced last week, after reporting its highest annual profit in 10 years.
JLR posted a £2.5bn pre-tax profit in the year to 31 March, its highest profit in a decade.
The company is pleased that the UK has negotiated down tariffs on cars exported to the US, saying:
In April, at the start of the new financial year, we implemented a series of short-term actions to address the immediate impact of trade tariffs introduced by the US Administration on the global automotive sector. On 8 May 2025 we welcomed the positive announcement of a US-UK trade deal. This reduces US trade tariffs on UK auto exports to the US from 27.5% to 10%, within a quota of 100,000 vehicles. This deal brings greater certainty for our sector and stakeholders.
We will continue to engage with the UK Government on the detail of the trade deal. Our priority is to ensure we deliver for our global clients and protect EBIT through delivery of transformation and efficiency initiatives.
Thames Water’s CEO concedes that the company has run up “extremely high” costs on advisors, which total around £159m.
That bill reflects the fact Thames is the “largest restructuring of a balance sheet in British history”, Chris Weston says.
Life would be “extremely difficult for everyone” if Thames Water falls into a special administration regime (effectively nationalisation), its chair told MPs.
Adrian Montague suggested that suppliers might wonder how much longer they wanted to work for Thames; senior management might also consider their position, and there would be a considerable burden on government, who could face £5bn of extra costs, and would need to eventually find a buyer for the business.
Touching again on Thames’s cash squeeze, Sir Adrian Montague says the company’s liquidity was very tight when it was negotiating with lenders recently.
Having only five weeks liquidity “is a nightmare” for a large company such as Thames, Montague says.
But, he insists, Thames was in a “beggers can’t be choosers situation” when it was negotiating the deal to provide a £3bn lifeline.
Montague adds:
We were running along the edge of the precipice, and we had to secure the financial future of the company.
MPs have also quizzed Thames Water’s top brass about its future ownership.
Chief executive Chris Weston told the committee it was still a “very fluid situation”, despite investment firm KKR having been chosen as the sole bid to invest in the company.
He says there is still a possibility that Thames could go back to other interest parties if “if the current process fails”. Other options are that creditors step in, and execute a debt-for-equity swap.
Or, there is a possibility the company could still fall into public ownership.
Weston says:
“It’s a very fluid situation but those both are possibilities.”
“There’s no guarantee we would not stay on a market-led solution as opposed to a special administration, but it is a very fluid situation and those are all possibilities.”
Montague: We’re here to put things right
Sir Adrian Montague then refuses to give a commitment to Helena Dollimore MP that the Thames Water top team at the committee hearing (him, CEO Chris Weston, and CFO Steve Buck) will remain in place through this parliament.
We live in a competitive marketplace, Montague points out, adding:
We have to live in the real world. No-one will give you a commitment that will be no change in the leadership team over five years. It is simply not possible.
Q: So how can we have any faith in the commitments you are making?
“We are the new kids on the block,” Montague declares, adding “We are making progress. We are here to try to put things right.”
We won’t quit until the job is done, but it is not realistic to say there will be no changes in the team over 5 years.
Q: Why would headhunters recruit from a failing company?
“It’s not a failing company”, Montague fires back, “it’s a company in recovery”.
We are making progress. This is a good team. You can see how the progress is starting to become apparent.
Committee chair Alistair Carmichael seems unimpressed, asking:
Q: If a 40% rise in pollution incidents is a sign of success, what does failure look like?
Montague says “We must go back into those pollution incidents”.
Thames Water chair Sir Adrian Montague then defends the company’s controversial decision to pay dividends, rather than investing in improving its infrastructure.
Montague says Thames decided to pay the ‘intergroup’ dividend, of £157m, in October 2023 so it could keep discussions about future capital injections with then-shareholders alive.
“In the event, that failed”, he admits. But at the time, Thames didn’t know it wouldn’t work.
Helena Dollimore MP points out that a better use of that would have been to mend pipes, or to fund the 100 infrastructure projects that were delayed in summer 2023.
UPDATE: Montague may have his dates mixed up here. The Guardian reported last June that this £150m dividend was agreed in March 2024, having already faced investigation for paying a £37.5m dividend in October 2023, for which it was fined.
