Deep dive · Water · Accounts to March 2026

Inside the accounts · How does Thames Water make its money?

Thames Water's bills brought in £1bn more in 2025/26, and it still borrowed £1.57bn from its creditors

Thames Water Utilities Limited supplies drinking water and takes away sewage for 16 million customers across London and the Thames Valley. What it can charge is set by the regulator, Ofwat, and in April 2025 its charges rose 35%. Its accounts for the year to 31 March 2026 show revenue up £1bn to £3,756.5m and a return to profit. They also show why that wasn't enough: record investment, rising interest, £1.57bn of new loans from its creditors, no dividends, and a warning about the company's future while it seeks to be recapitalised. Where a figure says something about how the business runs, we explain it.

CompanyThames Water Utilities Limited · 02366661

Accounts readAccounts to March 2026 PDF ↗filed 3 September 2026

ByJames Sproule · 20 October 2026

Reading time9 min read

£3.76bnRevenue, up 37%

£2.68bnCapital investment, up 20%

£1.57bnNew debt from creditors, net of fees

£0Dividends; none to outside shareholders since 2017

In 60 words

The answer

Thames Water makes its money from bills that Ofwat allows it to charge. In 2025/26 those rose 35%, lifting revenue 37% to £3,756.5m and turning a £1,513.8m loss into a £113.0m profit. But the £1,908m of cash its operations generated didn't cover £2,544m of investment and £494m of net interest. Creditors lent £1,570m. No dividends were paid.

How it is paid

Ofwat sets the price

The company is "an appointed water and wastewater services provider", and the retailer for household customers in London, the Thames Valley and the surrounding area (p. 107). Every day it supplies 2.6 billion litres of drinking water and treats 4.3 billion litres of wastewater (p. 3). It can't set its own prices.

Every five years

Ofwat sets the revenue

"Ofwat reviews the plans of water companies to decide what they should deliver and how much revenue they can collect from customers. This allowed revenue is then used to set tariffs" (p. 6).

Final Determination runs to 2030

April 2025

Charges up 35%

Allowed revenue reflects CPIH inflation of 3.5% and regulator-approved weighted average 'K factors' of 24.6% for water, 31.8% for wastewater and 66.2% for retail (p. 38).

Average combined bill £656 (p. 6)

Penalties

Missed targets cost revenue

Revenue in 2025/26 "reflects historic wholesale and retail Outcome Delivery Incentive (ODI) penalties" for past performance (p. 38).

£78m, down from £95m

Unpaid bills

Bad debt comes off

The bad-debt charge rose £27m to £113m, "of which £74 million related to current year bills which is accounted for as a deduction to revenue" (p. 38).

3.6% of household revenue, from 3.8%

What this means for Thames WaterIts revenue moves with Ofwat's decisions, not with how much water people use. The 37% rise in 2025/26 came from the new price control, not from more customers. Investment is paid for slowly: the CFO describes "the regulatory model where the cost of these network improvements is spread over many years to protect bills and ensure fairness" (p. 37). That is why a year of record investment needs borrowing, even with bills up by a third.

Background, not from the accountsOfwat's price controls run for five years, known as asset management periods (AMPs). AMP8 runs from April 2025 to March 2030. Investment is added to the Regulatory Capital Value (RCV), and companies recover it through bills over many years, with an allowed return on it. Thames Water's RCV was £22,725m at March 2026 (p. 39).

Not disclosed. Ofwat's allowed revenue for the year or for AMP8 in pounds, or the allowed return on the RCV. The company agreed to refer its Final Determination to the Competition and Markets Authority, then agreed to defer that request (p. 35); the accounts don't say whether bills would change if the referral went ahead.

The income statement

The water company on one page

Revenue of £3,756.5m, less operating costs and with £96.3m of other income, left £1,361.0m of operating profit. Then came the debt. After interest, accretion on inflation-linked loans, derivative losses and restructuring fees, profit before tax was £226.4m, and £113.0m after tax (p. 104).

From £3.76bn of revenue to £1.36bn of operating profit, 2025/26Other running costs: materials, insurance, legal fees and research. Own work capitalised moves staff and other costs spent building assets onto the balance sheet.

Totals
Costs and charges
Income and credits

Consolidated income statement, p104; note 3, p129.

Then the debt: from £1.36bn to £113m of profitInterest and accretion are shown after £200.8m was capitalised into the cost of new assets; before that they came to £1,032.6m.

Totals
Costs and charges
Income and credits

Consolidated income statement, p104; note 5, p131; note 7, p131.

£1,003.9m

of interest and RPI accretion on borrowings, before £200.8m was capitalised into the cost of new assets. That is 26.7% of revenue (note 5, p. 131; our arithmetic).

£1,270.6m

Last year's loss came mostly from a provision against money lent to its parent company. This year's further provision was £30.6m (note 7, p. 131).

What this means for Thames WaterThe company reports an "underlying" result that strips out one-off items and the Tideway tunnel. On that basis, operating profit more than doubled to £1,282.1m and profit after tax was £203.9m, against £12.6m (p. 104). The jump in profit is the bill rise: underlying operating costs grew 11%, revenue 39% (p. 38). The company is "not currently in a cash tax paying position" for corporation tax, because of capital allowances, interest deductions and group relief; it paid £225m in business rates, employer National Insurance and other taxes (p. 38).

The finding

£1bn more from bills

Households pay most of it. Of £3,830.8m of gross revenue, households paid £2,973.5m, 78%. Household wastewater charges rose 41% to £1,498.1m and water charges 29% to £1,210.8m (p. 127).

Retail doubled. The household retail charge, for billing and customer service, rose from £129.1m to £264.6m (p. 127). Ofwat's K factor for retail, 66.2%, was the highest of the three (p. 38). Business customers paid £660.4m, up 39%, with no retail charge (p. 127).

Some of the bill isn't Thames Water's. £141.2m was billed for the Thames Tideway Tunnel. "As cash is collected it is paid over to BTL under the 'pay when paid' principle" (p. 127). Bazalgette Tunnel Limited is the independent company building the tunnel (p. 104).

Where the bills went up: gross revenue by serviceBefore £74.3m of bad debt is taken off. Households are 78% of gross revenue.

2024/25
2025/26

Households: wastewater£1,498.1m

Households: water£1,210.8m

Households: retailbilling and customer service£264.6m

Businesses: water£349.8m

Businesses: wastewater£310.6m

Billed for the Tideway tunnelpassed on to Bazalgette Tunnel Limited£141.2m

Note 2, p127.

£656

The average combined water and wastewater bill for 2025/26 (p. 6).

£260m

of customer assistance, through social tariffs and other support, up from £115m (p. 38).

101%

rise in billing complaints in the year. "While we received more calls about billing we now answer those calls faster" (p. 11).

What this means for Thames WaterBigger bills brought more cash, but also more customers who struggle to pay. The bad-debt charge rose £27m to £113m, though as a share of household revenue it fell, which the CFO credits to social tariffs and "changing the metered payment plan assessments from 12 months to 6 months" (p. 38). Billing complaints doubled.

Not disclosed. The number of households and businesses billed, or how the £656 average bill splits between water and wastewater.

Where the money goes

Record investment, and a cash gap

£2,680m invested. Capital investment rose 20%, including capitalised borrowing costs and assets adopted from developers (p. 37). Without those, £2,369m: £963m on the water network, £996m on wastewater and £410m on digital, fleet and other programmes (pp. 38 and 39).

Where it went. £406m on leakage and future supply, including more than 245,000 smart meters; £365m on maintaining reliable supply, including mains replacement; £481m upgrading sewage treatment works (pp. 38 and 39).

Cash didn't keep up. Operating cash flow was up 48% to £1,908.2m. Investment, in cash, rose 26% to £2,544.0m. That left free cash flow of minus £635.8m, and £494.4m of net interest on top (p. 39).

Cash in from customers didn't cover the investmentOperating cash flow rose 48%, but investment rose 26%. Creditors lent the gap and the interest.

Cash from operations
Spent on investment
New debt from creditors

CFO's summary cash flow statement, p39.

£807m

of depreciation, amortisation and impairment, against £2,680m of investment: the asset base is growing much faster than it wears out (p. 38).

£789.0m

of third-party costs, up 34% and the biggest single operating cost. The CFO says it "invested more in third party support for the transformation programme" (pp. 38 and 129).

For every £100 of revenue, £67.72 went on investmentCash items in 2025/26, per £100 of revenue. Investment and interest came to £80.88; operations brought in £50.80.

Cash from operationswhat the business generated£50.80

Spent on investmentpipes, works, meters, IT£67.72

Net interest paidinterest paid less interest received£13.16

New debt from creditorsnet of fees£41.79

CFO's summary cash flow statement, p39; income statement, p104. Our arithmetic.

What this means for Thames WaterUnder the regulatory model the investment is recovered through bills over decades, but it has to be paid for now. In 2025/26 the company's cash outflow before new financing was £1,130.2m (p. 39). It was covered by £1,570.0m of new debt, which is why cash rose to £557.1m. Of that cash, £197.0m sits in a subsidiary and "is only available to TWUL subject to creditor consent" (p. 106).

Not disclosed. What the £789.0m of third-party costs buys, beyond "third party support for the transformation programme", or how much of the investment is to meet legal and environmental obligations rather than to grow capacity.

Borrowing

£19bn of borrowings, and a new top layer

Borrowings rose £2bn. The balance sheet shows £18,982.0m of borrowings, up from £16,976.0m, and £1,785.1m of long-term derivative liabilities (p. 105). Statutory net debt was £18,515.5m (p. 39).

A lot of it rises with inflation. £8,826m of the debt is index-linked (p. 40). Its RPI accretion, £163.4m this year, is a cost even though no cash is paid until the debt matures (p. 131).

New money ranks first. Creditors lend through a subsidiary, Thames Water Super Senior Issuer plc, which on-lends to the company (p. 40). Its facilities carry interest of 9.75% (p. 140). Because some conditions to the funding are unmet, drawings have needed the consent of those creditors (p. 40).

£20bn of debt, and how its interest is setPost-swap principal plus inflation accretion. Average maturity 11.2 years.

March 2025
March 2026

Index-linkedrises with inflation£8,826m

Fixed rate£8,716m

Floating rate£2,498m

CFO's statement, p40.

86.1%

Senior gearing

Covenant net debt of £19,772m against an RCV of £22,725m, up from 84.4% (p. 39). "Testing of the gearing covenant and interest cover covenants are currently suspended" (p. 39).

Caa3

Credit ratings

Moody's corporate family rating. Moody's cut the Class A debt from Caa3 to Ca on 10 July 2026; S&P rates it CCC, negative (p. 40).

£191.4m

Cost of restructuring

£129.6m of advisory fees on the debt restructuring plan, in finance costs, and £61.8m of restructuring costs in operating expenses (pp. 129 and 131; our sum).

What this means for Thames WaterDebt costs more as the company's position weakens. The effective cost of interest rose to 5.7% from 5.1%, and the cash cost to 3.8% from 2.4%, "driven by new debt issued at a higher cost" (p. 40). Operating cash flow covered senior debt cash interest 1.46 times, up from 1.09 (p. 39). Existing lenders were given £123.6m of zero-coupon "consent fee debt", in lieu of cash, for their consent to "inserting higher ranking debt in the form of the super senior facility and extending debt maturities" (p. 140).

Not disclosed. Who the lenders are, or how the £1,003.9m of interest and accretion splits between existing bondholders and the new super senior lenders.

Staff and pay

8,472 people and £605m of pay

£605m of staff costs, up 18%£71,500 a head, up 9% (our arithmetic).

2024/25
2025/26

Wages and salaries£494.5m

Employer National Insurance£62.8m

Pensionsdefined benefit and contribution£44.5m

Apprenticeship levy£3.6m

Note 3, p129; note 4, p130.

Who the 8,472 people areMonthly average employed in 2025/26. Each square is 1%.

Asset operations and capital delivery: 6,051
Retail: 1,319
Group services: 679
Digital transformation: 423

Note 4, p130.

Hiring for the upgrade. The average workforce rose 8.3% to 8,472, most of them in asset operations and capital delivery (p. 130). Employment costs rose 18% "as we hired more skilled people particularly in the frontline to improve the performance of our network assets and increase compliance" (p. 38).

£71,500 a head. Staff cost per average employee rose 9% from £65,500 (our arithmetic from pp. 129 and 130).

Part of the pay builds assets. £412.2m of "own works capitalised" was moved out of operating costs into the cost of new assets, up from £291.6m (p. 129). Staff working on projects are paid from the investment budget, not the running costs.

What this means for Thames WaterThe workforce is being built up to deliver nearly double the investment of the last five-year period (p. 37). Because more of their time is capitalised, the rise in staff costs shows up partly in the investment figure and depreciation in later years, not only in this year's profit.

Not disclosed. Pay by grade or role beyond the four categories, or the split between people running the network and people delivering capital projects.

Regulators and courts

Fines, investigations and claims

Last year's Ofwat charges. The 2024/25 accounts took £104.0m for Ofwat's investigation into the wastewater business and its sewage treatment works, and £18.2m for its investigation into dividends (p. 129). At March 2026, £83.1m and £14.6m were still provided, due "following agreed payment plan with Ofwat" (p. 149).

More set aside. Environmental, legal and regulatory provisions rose to £311.7m. The increase reflects "revised estimates of liabilities related to future prosecutions for environmental incidents", including five incidents "formally joined for prosecution" (p. 149).

An enforcement order. The company "Received Enforcement Order from Ofwat in May 2025 which we have since been working towards compliance with" (p. 35).

£312m set aside for environmental, legal and regulatory claimsEnvironmental, legal and other regulatory provisions, one of five provision types.

At 1 April 2025£260.9m

Added in the yearincluding future prosecutions£91.3m

Usedpaid or settled£24.5m

Releasedno longer needed£16.0m

At 31 March 2026includes £97.7m for two Ofwat cases£311.7m

Note 22, p149.

Unlimited

Environment Agency

An ongoing investigation into storm sewage discharges. "The potential penalty for an environmental offence is a criminal conviction and an unlimited fine"; no amount can be estimated (p. 154).

Up to 10%

Ofwat, WINEP

An investigation into delays to environmental schemes. Ofwat's powers include "a financial penalty on the Company of up to 10% of annual turnover of the relevant regulated business" (p. 154).

£159m

Household claim

A collective claim in the Competition Appeal Tribunal over pollution reporting. It was dismissed; the Supreme Court gave permission to appeal in June 2026 (p. 154).

What this means for Thames WaterFines and penalties reach the accounts in three ways: as deductions from revenue (£78m of ODI penalties this year), as provisions when a payment is likely, and as contingent liabilities when it can't be measured. Fines can't be deducted for tax: "Disallowable expenditure primarily relates to fines and restructuring costs" (p. 132).

Not disclosed. Amounts for the Environment Agency, WINEP and Industrial Emissions Directive matters, which the directors say can't be reliably estimated, or a schedule for paying the £97.7m still owed on the two Ofwat cases.

Ownership and pay

Who owns it, and what they take out

Shareholders

The ultimate parent, Kemble Water Holdings Limited, "is owned by nine shareholders, of which the largest is Ontario Municipal Employees Retirement System (OMERS) with a 31.777% holding" (p. 157).

£0

Dividends

None to the immediate parent in 2025/26 or 2024/25 (p. 133). "No dividends to external shareholders have been paid since 2017 with profits being fully reinvested in the business" (p. 37).

£1,249.1m

Lent to the parent

Loans owed by Thames Water Utilities Holdings Limited, plus £199.0m of interest. They are almost entirely provided against: £1,270.6m last year and £30.6m this year (p. 131).

£1,163k

Chief Executive

Total pay, up from £1,035k: salary £869k, pension £104k, benefits and other £91k, and a £99k deferred award for 2023/24. Under the Water (Special Measures) Act, no performance-related pay is payable to the CEO for 2024/25 or 2025/26 (p. 80).

£2,178k

Restructuring officer

Fees for the Chief Restructuring Officer's services, paid to the advisory firm that provides them, up from £468k for part of last year (p. 80).

£11.5m

Board and executive team

Key management pay rose from £9.3m, including £4.1m of bonuses under performance and retention plans (p. 157).

What this means for Thames WaterThe owners' stake on the balance sheet is small: net assets were £341.8m, against £22,708.3m of property, plant and equipment (p. 105). The company's dividend policy is to "pay a progressive dividend", but it declared none in 2025/26 (p. 92). For now, lenders, not shareholders, are funding the business.

Not disclosed. The other eight shareholders in Kemble and their stakes; the accounts name only the largest. They also don't say what the parent used the £1.25bn loans for.

In the directors' words

Going concern and the recapitalisation

The restructuring: what is drawn, and what is still neededQuarters from January 2025. A second court-approved plan (RP2) is needed for the recapitalisation (p107).

Jan 25Apr 25Jul 25Oct 25Jan 26Apr 26Jul 26Oct 26Jan 27Apr 27Jul 27Oct 27

First restructuring plan

Feb 2025

Covenant tests suspended

25 Feb 2025 to Mar 2027

These accounts

Apr 2025 to Mar 2026

Super senior loans drawn

Apr 2025 to Jul 2026

£750m more needed

Aug 2026

£2.4bn more to Oct 2027

From Dec 2026

Earliest debt maturity

Mar 2027

Material accounting policy information, basis of preparation, pp107–108.

There exists a material uncertainty which could crystallise in the very near term which may cast significant doubt on the Group and Company's ability to continue as a going concern.
Basis of preparation, p. 107

The Directors base case is that the recapitalisation transaction will be agreed and implemented within the Assessment Period.
Basis of preparation, p. 107

A severe but plausible consequence would be a special administration of the Company under the Water Industry Act 1991.
Basis of preparation, p. 107

In plain termsThe company needs new equity and a restructured balance sheet. That needs its creditors' support, a final decision by Ofwat after a public consultation that "Ofwat has not as yet launched", and a second court-approved restructuring plan (p. 107). Until then it lives on super senior loans. It drew the last £213m of committed funding on 14 July 2026, expects to need a further £750m in August, and says it will need £2.4bn more to last to the end of October 2027 (pp. 107 and 108). Creditors holding 82% of its Class A debt and 73% of its super senior debt have written in support, but the letter "does not create legally enforceable rights" (p. 107). The auditors, PricewaterhouseCoopers, also flag the material uncertainty; their opinion is not modified (p. 97).

Background, not from the accountsSpecial administration is a regime under the Water Industry Act 1991 for water companies that can't pay their debts. A court-appointed administrator runs the company so that water and sewerage services carry on until it is rescued or transferred.

Not disclosed. The terms of the proposed recapitalisation: who would provide the new equity, who would own the company afterwards, or whether existing lenders would take losses.

Two years side by side

Year on year

2025/26 against 2024/25Percentage change, one scale. Profit is left off: it went from a £1,513.8m loss to a £113.0m profit.

Revenue£2,738.2m → £3,756.5m+37%

Household gross revenue£2,127.2m → £2,973.5m+40%

Business gross revenue£476.4m → £660.4m+39%

Third-party costs£587.2m → £789.0m+34%

Staff costs£512.7m → £605.4m+18%

Average employees7,824 → 8,472+8%

Staff cost per head£65.5k → £71.5k+9%

Capital investment£2,225.0m → £2,680.0m+20%

Operating cash flow£1,289.1m → £1,908.2m+48%

Interest on loans£705.1m → £840.5m+19%

New debt from creditors£1,083.1m → £1,570.0m+45%

Borrowings£17.0bn → £19.0bn+12%

Income statement p104, balance sheet p105, notes 2–5 pp127–131, CFO's statement pp37–39.

Show the figures as a table

Measure	2025/26	2024/25
Revenue	£3,756.5m	£2,738.2m
Gross revenue from households	£2,973.5m	£2,127.2m
Gross revenue from businesses	£660.4m	£476.4m
Staff costs	£605.4m	£512.7m
Third-party costs	£789.0m	£587.2m
Operating profit	£1,361.0m	£471.3m
Finance expense	£970.0m	£863.1m
Profit/(loss) before tax	£226.4m	−£1,646.6m
Profit/(loss) after tax	£113.0m	−£1,513.8m
Capital investment	£2,680m	£2,225m
Operating cash flow	£1,908.2m	£1,289.1m
New debt, net of fees	£1,570.0m	£1,083.1m
Dividends paid	£0	£0
Average employees	8,472	7,824
Borrowings	£18,982.0m	£16,976.0m
Regulatory Capital Value	£22,725m	£21,008m
Cash at year end	£557.1m	£306.4m
Net assets	£341.8m	£283.3m

2025/26 is the first year of Ofwat's AMP8 price control; 2024/25 was the last year of AMP7.

Quick answers

Questions about Thames Water

How does Thames Water make its money?

Does Thames Water pay dividends?

Not in 2025/26. Its accounts say no dividends were paid to its immediate parent, Thames Water Utilities Holdings Limited, in the year to March 2026 or the year before, and that 'no dividends to external shareholders have been paid since 2017'.

Who owns Thames Water?

Thames Water Utilities Limited's immediate parent is Thames Water Utilities Holdings Limited. Its ultimate parent is Kemble Water Holdings Limited, which the accounts say is owned by nine shareholders; the largest is the Ontario Municipal Employees Retirement System (OMERS), with 31.777%.

How much debt does Thames Water have?

Borrowings of £18,982m on the balance sheet at 31 March 2026, up from £16,976m. Statutory net debt was £18,515.5m, against a Regulatory Capital Value of £22,725m. Creditors provided £1,570m of new debt, net of fees, during the year.

Is Thames Water going into special administration?

The accounts don't say it will. The directors' base case is that a recapitalisation is agreed and carried out within 12 months of July 2026. They flag a material uncertainty over going concern, and say that if the company cannot secure enough funding, 'a severe but plausible consequence would be a special administration of the Company under the Water Industry Act 1991'.

How much has Thames Water set aside for fines and claims?

£311.7m of environmental, legal and regulatory provisions at 31 March 2026, up from £260.9m. That includes £83.1m for Ofwat's investigation into its sewage treatment works and £14.6m for Ofwat's dividends investigation, both charged in the previous year. Several Environment Agency and Ofwat matters are listed as contingent liabilities with no amount.

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