The lenders of Thames Water, Britain's largest water company, are preparing a legal challenge in the event of a nationalisation attempt by a Burnham-led government.

Burnham, who will become Prime Minister on Monday, has previously advocated for greater public control of the water and energy sectors, including the nationalisation of Thames Water.The company is currently £20bn in debt, with lenders proposing a deal to write off nearly half of this debt and inject £3.35bn in cash in exchange for leniency on future pollution fines.However, the government rejected this proposal as insufficient, citing concerns over consumer and environmental impacts.

Sources close to the creditors indicate they would pursue full debt repayment in the event of nationalisation, potentially leaving the government with a multi-billion-pound bill.

The government has expressed readiness for any scenario, including temporary nationalisation, but critics argue that the private sector's failure to address the company's financial distress has led to years of underperformance and rising pollution.

The debate highlights broader concerns about the privatization of essential services and the potential for taxpayer-funded bailouts if private sector solutions fail.