Water firms are blocked from using customer cash to pay top bosses underserved £6.8m bonuses, watchdog announces

Nine water firms, including stricken Thames Water, have been blocked from using customer cash to fund undeserved bonuses for top bosses worth £6.8million.

Regulator Ofwat has stepped in and used new powers to force water firms to get investors, not customers, to stump up cash to fund payouts.

It comes as water firms faced public anger and political backlash recently over the staggering amount of sewage dumped or leaked into rivers and seas, with some being fined tens of millions. 

The regulator has already demanded water companies in England and Wales to return almost £158million to customers after firms failed to meet key targets on reducing the amount of sewage spills.  

In its latest attack on the industry, Ofwat stepped in and directly blocked three firms from allowing customers to payout £1.55million in bonuses. 

These included the debt-laden Thames Water, which this year faces a £56.8million financial penalty for its leaks, Yorkshire Water, and Dwr Cymru Welsh Water.

Ofwat said a further six companies had voluntarily decided not to push the cost of executive bonuses worth a combined £5.2 million onto customers, with shareholders instead paying. It added it would otherwise have moved to block the payouts.

However, campaigners fear this will have little impact, with Feargal Sharkey writing on X: And how long do you think its going to be before water companies start massively increasing CEO basic salaries? Opps, its already happened, @SouthWestWaters CEO got a staggering £300,000 pay rise just weeks ago and that was after poisoning a whole town in Devon. 

Water firms have been blocked from using customers cash to pay out undeserved bonuses for top bosses by a regulator (file image of an overflow pipe releasing water into the Thames)

These included the debt-laden Thames Water, which this year faces a £56.8million financial penalty for its leaks (file image)

Campaigners have already voiced their concerns, however, over how water firms will respond 

David Black, chief executive of Ofwat, said: In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability.

While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.

Ofwat said new rules on water company bonuses and dividend payouts to shareholders were beginning to bite in their first full year since being introduced.

In blocking the awards, Ofwat will instead adjust costs for the companies so that they cannot recover it from customers.

It revealed that Thames Water - more than £16 billion in debt and at the centre of growing public outrage over pollution and rising bills - was planning to use customer cash to pay £770,000 in bonuses for its chief executive Chris Weston and chief financial officer Alastair Cochran.

Action was also taken against £616,000 worth of payouts for top bosses at Yorkshire Water, with the companies chief executive Nicola Shaw pocketing £371,000 while the firms chief finance officer, Paul Inman, received a £245,000 bonus.

And Dwr Cymru Welsh Water was also blocked from giving its top bosses £163,000 of bonuses from customer cash, with the firms chief executive, Peter Perry, earning £91,000 of bonuses in 2023/24. 

Other bosses to have bagged top bonuses in the last year include Southern Waters CEO, Lawrence Gosden who netted £183,000, Heidi Mottram head of Northumbrian Water who received £234,000, Liv Garfield, chief executive of Severn Trent who earned a £584,000 bonus, and Peter Simpson CEO of Anglian Water who took a bonus and deferred bonus payments of £455,000. 

Liv Garfield, chief executive of Severn Trent who earned a £584,000 bonus

Thames Water chief executive Chris Weston (left) and chief financial officer Alastair Cochran (right) received between them bonuses totaling £770,000.

Yorkshire Water chief executive Nicola Shaw (left) pocketed £371,000 in bonuses while the firms chief finance officer, Paul Inman (right) received a £245,000 bonus.

United Utilities chief executive Louise Beardmore got a £420,000 bonus for the last year

Dwr Cymru Welsh Water chief executive, Peter Perry (left) earned £91,000 of bonuses in 2023/24, while Southern Waters CEO Lawrence Gosden (right)  netted £183,000,

South West Waters chief executive Susan Davy (left) saw her total pay increased from £543,000 to £860,000 last year, which included a £298,000 shares bonus, and Heidi Mottram (right) head of Northumbrian Water received a £234,000 bonus

South West Waters chief executive Susan Davy declined to receive a £237,000 performance bonus for 2023/24. However, her total pay increased from £543,000 to £860,000 last year, which included a £298,000 shares bonus. 

United Utilities chief executive Louise Beardmore got a £420,000 bonus for the last year.  

Secretary of State for Environment, Food and Rural Affairs Steve Reed said: It is disgraceful that half of water companies have given out unjustifiable and unmerited bonuses.

That is why this Government is introducing urgent legislation to ban the payment of unfair bonuses to polluting water bosses so payouts of this kind can never happen again.

But there are deeper issues that need long-term solutions, which is why we have launched the largest review of the sector since privatisation.

Water firms paid out a total of £9.3 million in executive bonuses over the last financial year, Ofwat revealed.

It comes at a time of growing public and political pressure on the sector to address a dire recent performance on sewage pollution and leaks while customer bills are soaring.

Ofwat said it would be able to block bonus payouts entirely under the new water Bill being brought by the Government.

The regulator also published its latest report on water firm resilience showing that £1 billion was paid out in shareholder dividends in 2023-24, though this was £400 million less than the previous year thanks to a clearer link to performance.

In the report, it named Thames Water, South East Water and Southern Water as being in need of action to address big holes in their finances.

The situation comes amid growing anger over the amount of sewage dumped into Britains rivers and seas (pictured is a sewage leak at River Coln near Bibury)

Earlier this year fish were found dead in the River Coln near Bibury after a sewage spill 

In the report, it named Thames Water, South East Water and Southern Water as being in need of action to address big holes in their finances (file image) 

This means that the three firms are subject to high priority monitoring and cash lock-up measures, which prevents them from paying dividends without approval from the regulator.

A further seven companies have been declared as having an elevated concern over their financial resilience, while six firms are deemed to be standard, with no specific concerns over their financial health.

Mr Black said: Our new rules on exec pay and dividends link both to company performance.

Through these new rules, our enforcement action and our incentive regime, which has imposed £430 million in performance penalties since 2020, we are challenging companies to deliver improvements for both customers and the environment.

Water watchdog Ofwat is expected to confirm in December how much it will allow water companies to increase their bills by over the next five years.