- 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.
