An emergency nationalisation of Thames Water is being considered by ministers as the company scrambles to secure £1bn from shareholders.

The Government is drawing up contingency plans for the collapse of the utility company it battles to pay down a £14bn debt pile.

Ministers are in talks about the possibility of temporarily bringing the utility company back into public hands under a so-called special administration regime (SAR).

The discussions are understood to be taking place between water regulator Ofwat, the Department for Environment, Food and Rural Affairs (Defra) and the Treasury.

It comes after Thames Water chief executive Sarah Bentley stepped down with immediate effect on Tuesday amid mounting worries over the financial stability of the firm.

Its debts plunged in value on Wednesday as the City increased bets that lenders will not be repaid.