Government’s new law sees unfair bonuses banned for six water companies with immediate effect

• Unfair bonuses now banned for water companies that don’t meet high standards.  

• Water bosses awarded themselves over £112 million in bonuses and incentive payments in the last decade.  

• Strengthened enforcement is just one part of the Government’s strategy to reform the water sector and attract investment as part of its Plan for Change.  

Unfair bonuses have been banned for senior executives at six water companies, as new measures in the Water (Special Measures) Act come into force today (Friday, 6th June).  

The government is clear that transformative change across the water sector is needed to clean up our rivers, lakes and seas, and modernise the sector for decades to come.  

Under new rules, companies are not permitted to pay bonuses to water bosses that oversee poor environmental and customer outcomes. This delivers on a key manifesto commitment and has been backdated to apply to any bonuses relating to the financial year from April last year.  

This applies to Thames Water, Yorkshire Water, Anglian Water, Wessex Water, United Utilities, and Southern Water, where bosses are not permitted to receive bonuses with immediate effect.  

Water companies have awarded over £112 million in bonuses and incentives over the last decade. Last year alone, £7.6 million in bonuses were paid to water bosses in England. 

It’s crucial that companies attract the best talent to deliver essential upgrades to the water system. Companies that do meet Ofwat’s standards will still be eligible to pay executives bonuses – a powerful incentive for them to deliver immediate environmental improvements, better customer outcomes, and improve financial resilience.  

Environment Secretary Steve Reed said      

Water company bosses, like anyone else, should only get bonuses if they’ve performed well, certainly not if they’ve failed to tackle water pollution.  

Undeserved bonuses will now be banned as part of the Government’s plan to clean up our rivers, lakes and seas for good. 

Promise made, promise delivered. 

Today’s ban holds water bosses to account and ensures they can no longer cash in while their companies pollute rivers, neglect customers, or mismanage finances.  

Strengthened enforcement is just one part of the government’s strategy to reform the water sector, which also includes working with the companies and their investors to make the water industry one of growth and opportunity, attracting investment and ensuring its stable financial footing for years to come. 

The government is determined to reform the sector in a way that continues to attract high quality, long-term investors to rebuild our water infrastructure. Following the publication of the Independent Water Commission’s interim report, Ministers will look at proposals carefully, and outline further action in due course. 

While it is for water companies to set their own remuneration, new standards published by Ofwat that come into force today mean bonuses will not be permitted be handed out in specific cases when a water company   

• Fails to meet core environmental standards and presides over serious pollution offences 

• Fails to meet basic financial resilience standards (e.g. meet minimum credit rating requirements)    

• Fails to meet core consumer standards (e.g. failure to operate and maintain sewage networks)   

• Is convicted of a criminal offence (e.g. criminal convictions for serious environmental failings including illegal spills)   

Under new rules published by Ofwat today, any company failing to meet key standards will automatically lose the right to award bonuses. If a company pays a bonus while banned, Ofwat has the powers under the Water (Special Measures) Act to direct the company to claw back the money. Any company that does not comply with Ofwat’s directions will face enforcement action. 

To further protect customers and clean up our waterways, the government has secured a record £104 billion of private investment – the largest ever since privatisation to cut sewage discharges by nearly half over the next five years. This money will now be ringfenced for new pipes and treatment works, not shareholder payouts.  

Notes to editors  

• The table below outlines companies’ compliance on current information. 

• It is up to individual water companies to determine appropriate financial rewards. Ofwat will consider action required once water companies publish their remuneration decisions in their annual reports for the 2024-25 financial year.

ANNEX A Companies affected by the ban

*Anglian Water’s CFO is not subject to the ban because they were not in post for the Cat.1 incident. Their CEO was in post during the Cat.1 incident and therefore faces a ban.   

**Wessex Water’s CEO is not subject to the ban because they were not in post for the criminal offence that triggers the ban.

ANNEX B Total CEO/CFO bonuses paid by water companies in England (in thousands)

*Long Term Incentive Plan value for Southern Water is a four-year figure, from 2011-15. Since there was no annual breakdown for 2014/15, the LTIP value has been divided by 4.

ANNEX C Category 1 incidents

Quotes

Ali Plummer, Director of Policy & Advocacy at Wildlife and Countryside Link, said 

Bonuses should reflect excellence, not routine negligence and widespread environmental degradation. Our rivers and wildlife continue to suffer because companies have repeatedly prioritised profit over public health and nature protection. Removing bonuses if high standards aren’t met, is a welcome first step from Ofwat. 

This must be backed up with strong resources for environmental regulators to ensure this is enforced.

Ben Seal, Head of Access & Environment, Paddle UK, said

When something so precious as our nations water is on the line, public outrage at water executives pocketing big bonuses for failing to prevent pollution, is entirely justified.  

It is positive to see the steps taken through the new Water Special Measures Act beginning to take effect. Let’s hope that blocking the payment of these bonuses is just another means of helping focus minds on driving up environmental performance, rather than prioritising profit. 

Mark Lloyd, CEO, The Rivers Trust, said

The fact that water company bosses will no longer be rewarded for poor environmental performance is a significant moment in rebuilding public trust. It’s great to see the environment being valued as it should be, and that the personal responsibility of water industry leaders in looking after the environment is being recognised. 

The measures announced today tackle the most serious pollution incidents, but we still need to be aware that the vast majority of pollution comes from smaller, more insidious events which, in combination, can cause far greater harm to our rivers.

Ali Morse, Water Policy Manager at The Wildlife Trusts, said  

This is a change that’s important to billpayers. Customers don’t think it’s right that senior staff are rewarded whilst our rivers and seas bear the brunt of poor water sector performance. No one is under any illusions that this alone will significantly ease pressure on household bills, or make good the harms caused to the environment already; it’s more a point of principle – that even a single incident can result in a bonus ban –  and, along with other recent changes, sends a strong signal to the industry that it must do more to prioritise the health of the environment upon which its business relies.

Deborah Meaden, Businesswoman, entrepreneur and Dragons Den Investor, said

This is a very welcome step as part of the battle to better protect our waters and waterways. Bonuses should rightly be focused on constantly improving water quality in our seas and rivers, not just to stop the damage but actually repair and restore.