Thames Water could be taken over by the Government, with its £15 billion debt added to the public purse, reports have suggested.

A blueprint codenamed Project Timber is being drawn up in Whitehall, according to the Guardian newspaper, which could see the UK’s largest water company effectively nationalised.

Under the plans, the company, which serves 16 million customers in London and the Thames Valley region, would be placed in a form of special administration in the scenario that its parent company fails.

Once under the stewardship of ministers, it could be broken up into two separate companies serving London and the Thames Valley, the newspaper said, though the Government and water regulator Ofwat remain optimistic this will not happen.

Some of Thames’ lenders could lose more than a third of their investment under the plans, according to the reports.

There is deep concern within Westminster about Thames Water’s finances, with multiple MPs having raised concerns about its struggle for cash to stay afloat in the Commons.

The Government would not be drawn into directly commenting on the contingency planning, with the Department for Environment, Food and Rural Affairs (Defra) only saying it prepares for a “range of scenarios”.

“As a responsible Government, we prepare for a range of scenarios across our regulated industries – including water – as the public would expect,” a Defra spokesperson said.

Thames Water has reportedly drawn up an updated business plan, which could be published within days amid its financial woes.

It had originally wanted to raise customer bills by 40 per cent to fund an investment programme worth £18.7 billion under plans published in October, but the company said water regulator Ofwat had imposed regulations on the plan which made it “uninvestable”.

It meant the funding crisis facing Thames Water deepened as investors pulled a £500 million emergency funding package that was due to be paid at the end of April.

Furthermore, the holding company behind Thames Water, Kemble Water Finance Limited, told creditors earlier this month it defaulted on some of its own debts after missing an interest payment.

The company has £2.4 billion cash available as of February, enough cash for it to remain solvent until next year, possibly delaying any decision about its future for the next government.

Liberal Democrat Treasury spokesperson and Richmond Park MP, Sarah Olney said: “Millions of households and taxpayers deserve to know Thames Water’s fate. This corporate clown show must end now.

“The secret plans must be published immediately. Thames Water should have been put into special administration long ago, but the Government is too weak to take on this disgraced polluter.”

Neither Ofwat nor Thames Water wished to comment on the reports.