Executive bonuses banned at six water companies under new powers

(Sharecast News) - A raft of water companies have been banned from paying out executive bonuses, including Thames Water, as new rules came into force on Friday. Under the Water (Special Measures) Act 2025, the government has granted regulator Ofwat new powers to ban executive performance bonuses if utilities fail to meet certain standards.

Payments will be prohibited if there are breaches or performance failures relating to consumer matters, the environment, financial resilience and criminal liability.

Helen Campbell, senior director for sector performance at Ofwat, said: "Water company bosses have a clear duty to safeguard our precious natural environment. That's why we welcome these new powers from government.

"Company bonuses continue to cause real concerns and understandably damage trust, so this power significantly increases the pressure on water company executives to become better custodians of our rivers and seas."

Six firms have already been banned from making payments under the new rules: Anglian Water, Southern Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water.

All were found to have committed the most serious Category 1 pollution breaches. Thames Water was responsible for six incidents, as well as breaching financial resilience regulations when the vastly-indebted firm's credit rating was slashed.

The ban is backdated to April 2024, allowing Ofwat to claw back any bonuses that have already been paid.

But it cannot prevent lost payouts being replaced by increased salaries, which happened when banker bonuses were capped following the financial crisis.

Water companies have long been criticised for failing to invest in infrastructure and allowing repeatedly sewage spills while still paying out dividends to shareholders - many of whom are based overseas - and signing off high remuneration packages for executives.

Since 2014/15, a total of £112m has been paid out in executive bonuses by the nine largest water and wastewater providers.

In 2023/24, however, £7.6m was paid out, the smallest annual figure for a decade.

Thames Water chief executive Chris Weston was paid a bonus of £195,000 in early 2024, just three months after joining the struggling business.

Water UK, the trade body which represents the industry, said the independent committees that decide on performance-related pay would abide by the rules.