Business1 min read

Water industry bonus ban to be tightened as Ofwat warns of ‘damage to public trust’

By · Via The Guardian Business · Published by Everything Blog

In short

Ofwat's existing measures have successfully blocked £10m in executive payments over the last two years, including £6.5m that was halted for the current year alone. However, the regulator is accelerating a wider review because companies are sidestepping the rules by granting lucrative retention packages and base pay increases to senior leadership. Under the planned reforms, regulators will assess whether bonus restrictions should be broadened to incorporate payouts originated by parent firms. Additionally, Ofwat demanded that a deferred £99,000 bonus for Thames Water's chief executive be paid by future owners instead of customers.

Key points

  • Regulators are strengthening pay oversight because water suppliers are actively circumven…: Regulators are strengthening pay oversight because water suppliers are actively circumventing executive bonus bans through alternative compensation mechanisms.
  • Watchdogs are reviewing options to prevent parent companies from issuing executive payout…: Watchdogs are reviewing options to prevent parent companies from issuing executive payouts that bypass utility-level compensation bans.
  • Water companies failing performance standards will face strict mandates ensuring sharehol…: Water companies failing performance standards will face strict mandates ensuring shareholders and future owners absorb executive pay rather than bill-paying customers.

Sources checked by our analysis pipeline: 1

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 chief executive Mark Thurston despite the bonus ban. Anglian will face increased monitoring of its governance arrangements because of the controversial payments.

Nine water companies in England and Wales – including Thames Water and Yorkshire Water – were banned from paying bonuses for the 2025-26 financial year, the regulator Ofwat said on Thursday. Seven of the bans related to environmental pollution.

The Labour government introduced the bonus ban last year amid public outrage over sewage leaking into Britain’s rivers and seas. Yet water company bosses’ pay has risen in the past two years despite the ban, according to Guardian analysis.

Campaigners and opposition politicians have argued that companies are circumventing the ban through a variety of payments which are not “performance-related” – but which effectively replace the banned bonuses.

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