Beware of financial ghouls: Royal Mail is in danger of becoming the next Thames Water, warns ALEX BRUMMER

Thames Water will be back in the spotlight today when a court is due to rule on whether an emergency £3billion loan from creditors should be allowed to proceed.

An alternative is that the utility company is forced into a special administration regime – renationalisation by another name.

Britain’s biggest water supplier has become a byword for mismanagement with its terrible record on sewage dumping, burst water mains and disruptive roadworks as it replaces Victorian-era pipes.

Despite the hostility, Thames is dissatisfied with a regulatory ruling that will allow it to increase prices to consumers by more than 35 per cent by 2030, and wants more. Average annual bills are due to start rising by one-third to £639 per household from April.

Current levels of government borrowing and debt mean the Treasury is less than enamoured by the prospect of Thames arriving on the national balance sheet. Labour’s return of railway franchises to state ownership is burden enough.

Thames is in deep difficulty because it has been plundered by financial players seeking to extract short-term gains at the expense of consumers, the environment and investment. 

It also has been disadvantaged by a regulator, Ofwat, which saw the dangers of overseas financial ownership and tax avoidance too late.

The Treasury, Department of Business and the rest of the Government singularly have failed to understand the danger to the public finances of allowing the ownership of utilities to fall into rapacious financial hands. 

Yet a bailout led by Elliott Management and others is infinitely better than putting the company back under state control where it could fester for months, if not years.

All of this is acutely relevant at present. The sale of the listed International Distribution Services (IDS), owner of the Royal Mail, to Czech billionaire Daniel Kretinsky is regarded in Whitehall as benign with Business Secretary Jonathan Reynolds signing it off.

The financial implosion at Thames Water began in a similarly unthreatening way.

Aussie infrastructure investor Macquarie was the winning bidder in an auction for Thames Water’s German utility owner, RWE. It placed a mountain of debt on to Thames Water’s balance sheet. The high cost of servicing that debt and paying dividends starved Thames of investment and put in place a labyrinthine financial superstructure, which is tricky to disentangle.

Royal Mail ownership is being transferred to Kretinsky’s EP Group with the help of £3billion of high-cost loans from overseas banks, adding to an existing debt burden of £2billion. 

Unions have been bought off with promises of no redundancies and generous pay deals. Even with disposals, the leverage will leave precious resources for much needed investment in delivery services.

The Royal Mail is in danger of becoming the next Thames Water. Keir Starmer’s government is repeating the same colossal error as a previous Labour regime, which stood by as the nation’s biggest water supplier fell victim to financial ghouls.

Loose tiles

The besieged investment trust sector has shown how interfering strategic shareholders can find themselves in a very different place to the minority.

Austrian investor MS Galleon has been a shareholder in Topps Tiles for a quarter of a century and built a 29.9 per cent stake.

One can understand why it might object to the High Street group overpaying for rival CTD Tiles, bought out of administration for £9million. 

But claiming the Competition and Markets Authority as an ally, when it raised competition issues in just four neighbourhoods out of 30 looks weird. Better consolidation than more empty stores on the High Street.

Big-box DIY chains, such as Kingfisher-owned B&Q with 300 outlets, should ensure Topps prices don’t get out of hand.

Silver lining

Time to start clearing out the mouldering and tarnished family silver in the loft.

Silver prices have shot up 14 per cent this year, after a 21 per cent rise in 2024, and are close to a decade-long high at $33-per-ounce.

The metal has lagged advances in gold but Trump’s tariff threats are providing a boost for both precious and industrial silver. No need to polish, just sell for scrap.

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