THE boss of Thames Water, Britain’s biggest water company, wants to lead a radical reshaping of the industry by taking over a dozen smaller rivals.

The government is considering relaxing long-standing merger restrictions that have historically hindered deals in the sector. David Owens, chief executive of the capital’s monopoly supplier, said that taking over smaller providers would bring down bills and improve customer service and investment: “There are 12 diddly little water companies around the south east. Their water charges are far higher than ours. If we were able to take over those water companies their bills would drop like a stone.”

South East Water, owned by Hastings Infrastructure, the Australian fund, is among the companies that Owens said was most interesting. Others including Dee Valley Water and Sutton and East Surrey Water are also thought to be vulnerable.

Tony Wray, head of Severn Trent, the country’s second-biggest water group, has also been vocal about merging with rivals. Allowing regional monopolies to grow larger, though, would be highly controversial for an industry notorious for poor service.

Thames provides sewage services to 13m people but provides drinking water to only 8m. It wants to mop up the 5m customers that are now served by the smattering of smaller providers around the South East. Thames has already begun working on deal values and integration models but is awaiting the outcome of a government assessment of merger rules.

In a review of the sector, Martin Cave, a professor at Warwick Business School, recommended a relaxation of rules that require any merger in the water industry to be automatically referred to the Competition Commission.

Changes to the regime would be incorporated into the Flood and Water Management bill, which is being reviewed by parliamentary committee.

Owens said: “There are only three industries that have an automatic Competition Commission referral: defence, media and water. Why?”

Any prospective deals will only be struck after the regulator Ofwat publishes its five-year price guidelines for water companies.

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