The water industry bonus ban is set to be tightened after regulator Ofwat raised concerns that companies were undermining the rules, amid large retention payments and base pay rises, singling out Anglian Water for payments worth up to £800,000 to its chief executive. The Labour government introduced the ban last year amid public anger over sewage pollution.
Ofwat said on Thursday it would accelerate a review of the bonus rules over concerns that companies were deliberately undermining the ban. The regulator highlighted Anglian Water's retention payments worth up to £800,000 to chief executive Mark Thurston, saying they "could give the impression the company had prioritised offering executive directors a cash award in a way that would not technically breach the rule and would in practice replace the loss of PRP [performance-related pay] prohibited by it." Anglian will face increased monitoring of its governance.
Nine companies in England and Wales, including Thames Water, Yorkshire Water, Anglian Water, Severn Trent Water, Southern Water, South West Water, Wessex Water and Dŵr Cymru (Welsh Water), were banned from paying bonuses for the 2025-26 financial year. Seven of the bans related to environmental pollution. Ofwat said the companies would have paid out another £6.5m to executives had the ban not been in place.
Thames Water paid its chief executive Chris Weston a previously deferred bonus of £99,000 during the year; Ofwat said future owners would have to cover the cost, not customers. The regulator also highlighted potential retention payments: £1m for Thames's chief financial officer, £1.5m for Northumbrian Water chief executive Heidi Mottram, and £1.7m for United Utilities chief executive Louise Beardmore.
Environment Secretary Angela Eagle said: "People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down. A wide-ranging review launching today will ensure that failure doesn't pay, whatever name the payment goes by. The bonus ban was the first step. Where there are loopholes, I want them closed."
Helen Campbell, interim executive director for delivery at Ofwat, said: "It is disappointing that so many companies continue to trigger the rule through serious performance failures which has seen £10m in payments blocked in the past two years. Public trust in the water sector remains low, and executive bonuses which do not reflect performance, use of retention payments and poorly explained increases in base pay contribute to that low trust."
Ofwat also criticised South Staffs Water for poor pay reporting. The review is expected to consider whether payments from parent companies fall under the ban. Andy Burnham has said he wants "more public control" over the water industry but has yet to decide on moving Thames Water into temporary government ownership.
Analysis
Why This Matters
- Water customers face rising bills and ongoing service failures; the bonus ban is meant to ensure executives are not rewarded for poor performance.
- If companies circumvent the ban through retention payments and base pay rises, the rules are effectively meaningless, further eroding public trust.
- The accelerated review could close loopholes and set a precedent for how other regulated industries handle executive pay in the wake of public outrage.
Background
The Labour government introduced the bonus ban for water companies in 2025-26 following widespread anger over sewage discharges into rivers and seas. Ofwat, the sector regulator, enforces the ban. Nine companies were barred from paying bonuses for the latest financial year.
Key Perspectives
Ofwat: Says the growing use of fixed retention payments and substantial base pay increases risks "damaging public trust and creating a perception that companies are circumventing the rule." The regulator is accelerating a review of the rules.
Angela Eagle (environment secretary): Wants to close loopholes so that "failure doesn't pay, whatever name the payment goes by."
Helen Campbell (Ofwat interim executive director): Calls it disappointing that many companies continue to trigger the rule through serious performance failures; notes £10m in payments have been blocked in two years.
Andy Burnham: Has said he wants more public control over the water industry but has not decided on whether to take Thames Water into temporary government ownership.
What to Watch
- The outcome of Ofwat's accelerated review, which will consider whether parent company payments should be included in the ban.
- Whether Burnham moves to place Thames Water into temporary government ownership after months of financial struggles.
- Anglian Water's response to increased monitoring and whether it adjusts its executive pay practices.
Checked
12 claims in this story checked against 1 source: 11 supported.
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- SupportedThe water-company bonus ban is set to be tightened, with Ofwat warning of damage to public trust.UK news | The Guardian: “Water industry bonus ban to be tightened as Ofwat warns of ‘damage to public trust’.”
- SupportedOfwat is accelerating a review amid concerns companies are undermining the bonus ban.UK news | The Guardian: “Ofwat on Thursday said it would accelerate a review into the rules, over concerns that companies were deliberately “undermining” the ban.”
- Partly supportedThe story says base pay rises are occurring, without the source’s timeframe or attribution to Guardian analysis.UK news | The Guardian: “Yet water company bosses’ pay has risen in the past two years despite the ban, according to Guardian analysis.”
- SupportedAnglian Water’s retention payments to chief executive Mark Thurston are worth up to £800,000.UK news | The Guardian: “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.”
- SupportedOfwat said Anglian’s payments could give the impression it was replacing prohibited performance-related pay without technically breaching the rule.UK news | The Guardian: “Anglian’s payments to Thurston “could give the impression the company had prioritised offering executive directors a cash award in a way that would not technically breach the rule and would in practice replace the loss of PRP [performance-related pay] prohibited by it,” Ofwat said.”
- SupportedNine companies in England and Wales were banned from paying bonuses for the 2025-26 financial year.UK news | The Guardian: “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.”
- SupportedSeven of the bonus bans related to environmental pollution.UK news | The Guardian: “Seven of the bans related to environmental pollution.”
- SupportedThe companies would have paid executives another £6.5m during the year if the ban had not been in place.UK news | The Guardian: “Ofwat said they would have paid out another £6.5m to executives during the year had the ban not been in place.”
- SupportedThames Water paid its chief executive Chris Weston a previously deferred bonus of £99,000 during the year.UK news | The Guardian: “Thames Water paid its chief executive, Chris Weston, a previously deferred bonus of £99,000 during the year , despite the ban.”
- SupportedOfwat said Thames Water’s future owners would have to cover the bonus cost, rather than customers.UK news | The Guardian: “Ofwat said that Thames Water’s future owners would have to pay for the bonus, rather than the money coming from customer bills.”
- SupportedAngela Eagle said the review would ensure failure did not pay and that she wanted loopholes closed.UK news | The Guardian: “Eagle said: “People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down. A wide-ranging review launching today will ensure that failure doesn’t pay, whatever name the payment goes by. “The bonus ban was the first step. Where there are loopholes, I want them closed.””
- SupportedHelen Campbell said £10m in payments had been blocked in the past two years and that retention payments and poorly explained base-pay increases contribute to low public trust.UK news | The Guardian: “Helen Campbell, the interim executive director for delivery at Ofwat, said: “It is disappointing that so many companies continue to trigger the rule through serious performance failures which has seen £10m in payments blocked in the past two years. “Public trust in the water sector remains low, and executive bonuses which do not reflect performance, use of retention payments and poorly explained increases in base pay contribute to that low trust.”