The water industry regulator has moved to tighten restrictions on executive bonuses after concluding that firms are deliberately undermining the ban through alternative payment schemes. Ofwat said it would accelerate a review into the rules, citing concerns that water companies were using fixed 'retention payments' and unexplained base salary rises to replace prohibited bonuses in a way that risks 'damaging public trust'. The Guardian UK Business reported that water company bosses' pay has risen in the past two years despite the bonus ban introduced last year.
Nine water companies in England and Wales, including Thames Water and Yorkshire Water, were banned from paying bonuses for the 2025-26 financial year, Ofwat said on Thursday. Seven of the bans related to environmental pollution. However, Anglian Water faced particular criticism for 'retention payments' worth up to £800,000 for chief executive Mark Thurston. Ofwat said the payments 'could give the impression the company had prioritised offering executive directors a cash award in a way that would not technically breach the rule and would in practice replace the loss of performance-related pay prohibited by it'. Anglian will face increased monitoring because of these controversial payments.
Other companies highlighted by Ofwat included Thames Water, where potential retention payments of £1m were made to the chief financial officer, Northumbrian Water with £1.5m for chief executive Heidi Mottram, and United Utilities where chief executive Louise Beardmore received £1.7m. Thames Water also paid its chief executive, Chris Weston, a previously deferred bonus of £99,000 during the year despite the ban. Ofwat said Thames Water's future owners would have to pay for this bonus rather than customer bills. The other banned companies were Severn Trent Water, Southern Water, South West Water, Wessex Water and Dŵr Cymru. Had the ban not been in place, these companies would have paid out another £6.5m to executives.
Environment Secretary Angela Eagle said she wanted to 'close loopholes' so that 'failure doesn't pay'. She said: 'People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down. Where there are loopholes, I want them closed.' Helen Campbell, interim executive director for delivery at Ofwat, said: 'It is disappointing that so many companies continue to trigger the rule through serious performance failures which has seen £10m in payments blocked in the past two years.'
The Labour government introduced the original bonus ban last year amid public outrage over sewage leaking into Britain's rivers and seas. Ofwat said it is understood that ministers will also consider whether payments from water companies' parent companies could be included in the ban. South East Water was not subject to the ban, but Ofwat said the company's shareholders will have to pay for future bonuses after huge supply failures left tens of thousands of households without water during the financial year.
For savers and households, the tightening of bonus restrictions could help protect water company bills from being used to fund executive payments while service failures persist.