Heavily-indebted Thames, which supplies about 16 million homes and businesses in London and elsewhere in southern England, has so far avoided nationalisation thanks to increased income, loans and hopes of fresh investment.

Environment Secretary Emma Reynolds on Tuesday said she was "not convinced" that a pound10-billion ($13.4-billion) bid by the international consortium London & Valley Water "is good enough for consumers or the environment".

Reynolds added in a statement that her reservations had been passed on to the UK water regulator Ofwat.

"We standby for any outcome," she added, which hinted that the company could be nationalised at great expense to the UK taxpayer.

The consortium hit out at the government's response, claiming in a statement that its "plan is by far the fastest route to improve outcomes for customers and the environment, without any government funding or any cost to taxpayers".

British water companies, privatised since 1989, have repeatedly come under fire for allowing the discharge of large quantities of sewage into rivers and the sea.

This has been blamed on under-investment in a sewerage system that dates back largely to the Victorian era.

Ofwat has meanwhile allowed Britain's privatised water suppliers to hike bills by sizeable amounts over the coming years, giving Thames a vital lifeline as it seeks funds to update its ageing infrastructure.

"Thames Water customers have been let down for far too long, with 15 years of underperformance, increasing serious pollution, and customers left to pick up the bill," Reynolds added on Tuesday.