The Government is reportedly drawing up contingency plans for the emergency nationalisation of Thames Water as concerns grow over its mammoth £14 billion debt pile.

Ministers are said to be in talks about the possibility of temporarily bringing the utility company back into public hands under a so-called special administration regime (SAR).

The discussions are understood to be taking place between water regulator Ofwat, the Department for Environment, Food and Rural Affairs (Defra) and the Treasury, but the plans are at a very early stage and may not need to be put in place.

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It comes after Thames Water chief executive Sarah Bentley stepped down with immediate effect yesterday (June 27) amid mounting worries over the financial stability of the firm.

Thames Water is the UK’s biggest water supplier and provides water services for 15 million people in London and the South East.

Owned by a consortium of pension funds and sovereign wealth funds, the company has come under pressure in recent years over its poor performance in tackling leaks and sewage contamination, while facing criticism for handing out big rewards to top bosses and shareholders.

Raw sewage discharge into rivers has become a problem for the firm throughout Oxfordshire with repeated discharges from sewage works in Oxford, Witney, and Wallingford, among others.

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Ms Bentley, who was appointed in 2020, said in May that she would give up her bonus after the company’s environmental and customer performance suffered.

But even after giving up the bonus, the chief executive managed to double her pay, raking in £1.5 million.

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On announcing her departure, she said: “The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance.”

Ofwat, the Treasury and Defra were not immediately available for comment.

Speaking to Sky News, children’s minister Claire Coutinho declined to comment directly on the reported plans to prepare for the possible collapse of Thames Water.

She said: “I certainly think there are water companies like Thames Water which are in difficult positions, but I think our position as Government is to make sure that we have the right policies in place to see consumers protected but also that we’re dealing with things which are really important to the country, like dealing with the sewage leaks.”

Thames Water’s owners last year invested £500 million in the firm – the first injection of equity into the group since privatisation.

They pledged a further £1 billion, subject to conditions, and warned that “further shareholder support may be required”.

Ofwat warned last December over the financial resilience of Thames Water, as well as Yorkshire Water, SES Water and Portsmouth Water.