The water company bonus ban is set to be tightened after the regulator accused the industry of a risk of damaging public trust with large payments to bosses that appeared to get around the rules. Anglian Water was singled out for particular criticism over retention payments worth up to £800,000 for its chief executive, Mark Thurston, despite the ongoing bonus ban.
Regulator Accelerates Review into Executive Pay Loopholes
Ofwat announced on Thursday that nine water companies in England and Wales were banned from paying bonuses for the 2025-26 financial year, with seven of these bans relating to environmental pollution. The Labour government introduced the bonus ban last year following public outrage over sewage leaking into rivers and seas, but executive pay has continued to rise over the past two years.
Campaigners and opposition politicians argued that companies are circumventing the ban through payments that are not performance-related but effectively replace banned bonuses. In response, Ofwat stated it would accelerate a review into the rules over concerns that companies were deliberately undermining the ban. Ministers will also consider whether payments from parent companies could be included in the restrictions.
The regulator warned that the growing use of fixed retention payments and substantial increases in base pay without sufficient explanation risks damaging public trust and creates a perception that companies are circumventing the rules. Ofwat highlighted potential retention payments of £1m for Thames Water’s chief financial officer, £1.5m for Northumbrian Water chief executive Heidi Mottram, and £1.7m for United Utilities chief executive Louise Beardmore.
Specific Company Actions and Government Response
Thames Water paid its chief executive, Chris Weston, a previously deferred bonus of £99,000 during the year despite the ban. Ofwat stated that Thames Water’s future owners would have to pay for the bonus rather than funding it through customer bills, while the company also faced criticism for raising executive base pay.
The other companies banned from paying bonuses for the upcoming financial year are Severn Trent Water, Southern Water, South West Water, Wessex Water, and Dŵr Cymru (Welsh Water). According to Ofwat, these firms would have paid out an additional £6.5m to executives during the year if the ban had not been in place.
Environment Secretary Angela Eagle stated that people are tired of seeing water bosses profit while rivers are polluted and customers are let down, adding that the wide-ranging review will ensure failure does not pay regardless of the payment’s name. Meanwhile, South East Water avoided the ban, but Ofwat ruled that its shareholders must pay for future bonuses following massive supply failures that left tens of thousands of households without water.
Helen Campbell, Ofwat’s interim executive director for delivery, noted that it is disappointing so many companies continue to trigger the rule through serious performance failures, which has resulted in £10m in payments being blocked over the past two years.
