Nationalising Thames Water and forcing losses on creditors will deter investment in UK infrastructure, a key bondholder has warned.
A senior fund manager at Royal London Asset Management said that bringing the heavily indebted water company into public ownership could “risk contagion” to investment in other projects.
Shalin Shah said forcing Thames Waters’ creditors to take losses risked angering investors at a time when Britain’s ageing infrastructure urgently needs private investment.
Mr Shah said the debacle “could unfortunately risk contagion to other infrastructure assets that are funded against similar regulation”.
The money manager argued this would ultimately increase costs for consumers.
Mr Shah told Bloomberg: “Political risks remain heightened around the balance between maintaining affordability on customer bills and allowing higher returns that unlock much-needed investment in the sector.”
Royal London Asset Management is a major holder of bonds issued by Thames Water’s operating entity and parent company Kemble.
The warning comes as the Government faces increasing pressure to intervene to support Thames Water after Kemble failed to make an interest payment on a £400m loan last week.