Water regulator Ofwat has announced that its new rule for water bosses’ bonuses has blocked £4m in rewards over the last financial year.
Ofwat gained the power to impose restrictions on bosses’ bonuses through the Water (Special Measures) Act 2025. The rule was applied for the first time this year, alongside a related measure to ensure that customers aren’t funding the bonuses.
Bad bosses don’t get bonuses
Over the last year, a total of six water companies have fallen foul of the new rule. Namely, Anglian Water, Southern Water, Thames Water, United Utilities, Wessex Water, and Yorkshire Water. For the most part, this is because they just can’t stop themselves from polluting our environment.
The companies in question created Catagory 1 pollution incidents. This category, the most serious of three, is made up of pollution events that “have a serious, extensive or persistent impact on the environment, people or property”. Because of these serious pollution incidents, the six companies – in compliance with Ofwat rules – didn’t award their bosses with a ‘job well done’ paycheck this year.
If it strikes you as bloody obvious that a boss who’s failing miserably at their job shouldn’t get a bonus, don’t worry – you’re not the only one. Gary Carter, national officer the union GMB, said:
Blocking bosses’ bonuses for private water companies’ frankly dismal performances is the absolute minimum the public expect.
Many of these people are lucky to have jobs. Water workers toil night and day to keep the taps running and spillages to a minimum.
But instead of investment in infrastructure, they see money sucked out of the system in dividends and bonuses. It’s a disgrace.
No more back-door payments
Ofwat is also considering a new requirement for firms to disclose payments made from group companies to water bosses. This potential rule seems directly motivated by a Guardian investigation from August, which revealed that Yorkshire Water’s failing CEO, Nicola Shaw, received massive payments from a parent company.
As the Guardian reported at the time:
Nicola Shaw received £660,000 from Yorkshire Water’s Jersey-registered parent company, Kelda Holdings, in the 2023-24 and the 2024-25 financial years. The size of the fees was not disclosed in the annual report of the regulated subsidiary, Yorkshire Water Services.
Yorkshire Water argued that it didn’t have to disclose the payments, given that Jersey isn’t subject to the same regulatory frameworks as the UK. The company kept up this refusal until the Guardian pointed out that this effectively prevented public scrutiny of Yorkshire Water’s accounting.
If instated, the new restriction from Ofwat would help to prevent water bosses from sneaking themselves a bonus through the back door, by having a partner company pay the sum rather than their own.
Dividends from sinking ships
Ofwat also noted that water companies’ dividend policies and transparency improved compared to last year. However, Thames Water is still deep in the hole in terms of its massive £20bn debt. Likewise, Ofwat also reported that several other water firms weren’t doing well enough to pay dividends this year:
Nine companies did not declare a dividend for 2024–25, in some cases to support financial resilience and growth. Thames, Southern, and South East are currently in cash lock-up under their licence and cannot pay dividends without Ofwat’s consent. In May 2025, Thames was fined £18.2 million for failing to link dividend payments to company performance.
The water regulator also warned that water companies will need to spend a record £104bn between now and 2030. This would require a massive amount of new funding in terms of both debt and equity.
The public pays twice
However, it looks like Ofwat is – at least in part – expecting customers to foot that bill. Campaign group Lawyers for River Action alleged in court of 4 November that the regulator is effectively allowing companies to charge customers twice in order to fix their shoddy infrastructure.
The group is arguing that water companies always had a duty to prevent pollution, even though they’ve failed repeatedly. As such, the massive hikes in water bills permitted by Ofwat – in some cases by more than 50% – are making customers pay to fix an issue that they were already paying to prevent.
River Action’s head of legal, Emma Dearnaley, said:
It is fundamental that the public should not be made to pay twice for water companies’ past failures to invest in improvements to stop sewage pollution. But River Action is concerned that Ofwat’s approach means customers could be paying again. Meanwhile, degraded infrastructure keeps spewing pollution into rivers and lakes across the country that should have been clean decades ago.”
Ricardo Gama, speaking for River Action’s legal representatives Leigh Day, echoed that sentiment:
Our client believes that this case shows that Ofwat has failed to make sure that water bills are used for infrastructure upgrades.
River Action will argue that the money that could and should have been used to make essential infrastructure improvements is now gone, and customers are being asked to foot the bill for those improvements a second time over.
It is undeniable that massive investment will be needed to fix the decades of neglect that private water companies have inflicted on Britain’s waterways. Stopping bosses’ bonuses and dividends from sinking companies is a start, but it barely scratches the surface.
However, if Ofwat and the water firms think that they can continue to extract money from the public without fixing the problem, they’ve got another think coming.
Featured image via the Canary
This post was originally published on Canary.