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

Detailed summary

Regulator to hasten review over concerns that firms are ‘undermining’ rules to make large payments to bossesThe water company bonus ban is set to be tightened after the regulator…

Regulator to hasten review over concerns that firms are ‘undermining’ rules to make large payments to bosses

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.

Angela Eagle, the environment secretary, said she wanted to “close loopholes” so that “failure doesn’t pay”.

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.

Ofwat on Thursday said it would accelerate a review into the rules, over concerns that companies were deliberately “undermining” the ban. It is understood that the review will also consider whether payments from water companies’ parent companies should be included in the ban.

The regulator said: “The growing use of fixed so-called ‘retention payments’ and substantial increases in base pay without sufficient explanation or supporting evidence risks damaging public trust and creating a perception that companies are circumventing the rule.”

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