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Thames Water is one of six water companies to be banned from paying their bosses bonuses, as ministers crack down on “unfair” payments across the industry that is in the political crosshairs.
The backdated intervention covers any bonuses relating to the financial year 2024-25, and will apply to Thames Water as well as Yorkshire Water, Anglian Water, Wessex Water, United Utilities and Southern Water, the government said in a statement.
The bonus ban only applies to a handful of chief executives and chief financial officers rather than other senior executives in the industry.
Steve Reed, environment secretary, said new rules that come into force on Friday mean bonuses will not be allowed where a water company fails to meet either core environmental, financial resilience or consumer standards.
The new powers to ban bonuses were given to regulator Ofwat through the Water (Special Measures) Act, which was passed by parliament earlier this year, in the wake of a public outcry about bill increases and sewage leaks across the sector.
Defra, the environment department, said the rules would lead to a bonus ban for six specific companies.
Reed said that water bosses had awarded themselves more than £112mn in bonuses and incentive payments over the past decade.
Last year the sector gave bonuses totalling £7.6mn, although this was the lowest level for a decade.
“Water bosses, like anyone else, should only get bonuses if they’ve performed well, certainly not if they’ve failed to tackle water pollution,” Reed said.
Thames Water, which is struggling to stay afloat after private equity group KKR withdrew a £4bn rescue bid this week, has been criticised for its generous approach to bonuses.
Last year the company, which is struggling under a £20bn debt pile, gave a £195,000 bonus to its chief executive Chris Weston for just three months in the job, while also giving £446,000 as a performance award to chief financial officer Alastair Cochran. Cochran stepped down in March. Those payments will not be blocked by the new ban because they covered the period before April 2024.
Thames Water attracted further criticism last month after revealing details of lucrative “retention payments” for some executives for agreeing an emergency £3bn loan. The company subsequently said it had “decided to pause the retention scheme” while awaiting further guidance from Ofwat.
The water industry has defended its incentive schemes by arguing that they are essential for attracting and retaining key talent. Sir Adrian Montague, Thames Water’s chair, told MPs last month that the senior management team was the company’s “most precious resource” and therefore needed incentivising.
The government argues that restricting bonuses at some companies would be a “powerful incentive” for the industry to improve its performance.
The Wessex bonus ban came after the company was found criminally negligent over sewage leaks that killed thousands of fish.
The Thames Water ban was over its poor financial resilience and seven environmental incidents, according to the government. The Yorkshire ban was over a failure on consumer standards and an environmental breach.
The other three companies saw the bonus ban imposed after each suffering one environmental breach.
Thames Water declined to comment. Wessex Water said its own policies stopped it from paying its bosses bonuses following the pollution incidents, and Yorkshire Water said chief executive Nicola Shaw had already decided not to receive awards this year. United Utilities said it would comply with the new rules, and Southern Water said it awaited full details of the policy. Anglian Water did not respond to a request seeking comment.
