THAMES WATER was accused of blackmailing customers and water regulator Ofwat today over a £500-million shortfall.

Investors for the heavily indebted utility giant pulled the plug on the funding lifeline due to be paid this week after claiming Ofwat’s business plan had made the firm “uninvestible.”

The move came after the regulator refused to bow to Britain’s biggest water supplier’s demand for a 40 per cent bill hike for its 16 million customers.

Investors claimed that Ofwat had “not been prepared to provide the necessary regulatory support” for their funding-and-turnaround plan agreed last summer.

The firm’s chief executive Chris Weston said it could face the prospect of special administration if no alternative funding could be found by the end of next year. This would likely see the taxpayer pick up the bill.

GMB union held crunch meetings with Thames Water bosses today ahead of a follow-up with Mr Weston next week.

National officer Gary Carter said: “Holding billpayers to ransom for costs after years of underinvestment is completely unacceptable.

“Thames Water investors are essentially blackmailing customers and Ofwat. 

“Assets and infrastructure are falling apart — instead of putting the money in to fix it, shareholders are refusing to pay a penny unless bills are allowed to rocket. 

“Holding bill payers to ransom for costs after years of underinvestment is completely unacceptable. 

“Shareholders need to think again and invest in Thames and the 8,000-strong workforce who keep the company afloat.” 

Labour called on the government to “stabilise” Thames Water, but stopped short of joining demands to nationalise the company.

Cat Hobbs, director of public service campaign group We Own It, said: “We the public have already paid for Thames Water’s mistakes.

“Why should we pay yet higher bills and see our rivers filled with sewage?

“We refuse to pay for this company’s reckless asset stripping. We call on the government not to bail out Thames Water but to nationalise it permanently.”

Unison head of environment Donna Rowe-Merriman added: “This utter chaos is further evidence the government needs to renationalise Thames Water — now.”

An open letter signed today by anti-sewage campaigners, including Windrush Against Sewage Pollution and Boycott Thames Water, called on ministers to refuse the firm’s requests for bill hikes and for shareholders to receive dividends.

Communities Secretary Michael Gove branded the water company’s leaders “a disgrace” and claimed the firm had acted in an “arrogant” way towards its customers.

He insisted Thames Water’s leadership must “carry the can” for the company’s shortcomings and not pass higher bills on to consumers.