Bosses at six water firms have been banned from receiving bonuses for the final monetary 12 months underneath new laws that comes into drive on Friday.
Senior executives at Thames Water, Yorkshire Water, Anglian Water, Wessex Water, United Utilities and Southern Water all face the restriction on performance-related pay for breaches of environmental, customer support or monetary requirements.
All six firms dedicated probably the most severe ‘Class 1’ air pollution breaches, with Thames chargeable for six such incidents, in addition to breaching monetary resilience laws when its credit standing was downgraded.
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‘Paddle-out’ protest in opposition to water air pollution
The 9 largest water and wastewater suppliers paid a complete of £112m in government bonuses since 2014-15, although the 2023-24 complete of £7.6m was the smallest annual determine in a decade.
The brand new guidelines give water trade regulator Ofwat the ability to retrospectively forestall bonuses paid in money, shares or long-term incentive schemes to chief executives and chief monetary officers for breaches in a given monetary 12 months.
Ofwat can’t, nonetheless, forestall misplaced bonuses being changed by elevated salaries, as routinely occurred within the banking sector when bonus pots have been capped following the monetary disaster.
Authorities sources insist they don’t wish to cap government pay, however prompt the regulator may take into account increasing its powers to make sure any remuneration is roofed by shareholder funds somewhat than buyer payments.
Water suppliers have routinely defended government bonuses and pay on the grounds that awards are needed to draw and retain the perfect expertise to guide advanced, multi-stakeholder organisations.
Thames Water’s chief government, Chris Weston, was paid a bonus of £195,000 three months after becoming a member of the corporate in January 2024, taking his complete remuneration to £2.3m.
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Thames Water fantastic defined
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‘Our rivers are devastated’
Final month, the corporate withdrew plans to pay “retention” bonuses of as much as 50% of annual wage to senior executives after securing an emergency £3bn mortgage supposed to maintain the corporate afloat into subsequent 12 months.
Earlier this week, its most popular fairness companion, US non-public fairness big KKR, walked away from a deal to inject £4bn regardless of direct lobbying from 10 Downing Road, partially due to concern over the adverse political sentiment in the direction of the water trade.
The choice got here a number of days after Thames was hit with a file fantastic of £123m for a number of air pollution incidents and breaching dividend cost guidelines.
Welcoming the bonus ban, the Setting Secretary Steve Reed stated: “Water company bosses, like anyone else, should only get bonuses if they’ve performed well, certainly not if they’ve failed to tackle water pollution.
“Undeserved bonuses will now be banned as a part of the federal government’s plan to scrub up our rivers, lakes and seas for good.”
Whitehall sources say they “make no apology” for calling out water company conduct, despite concerns raised by an independent reviewer that negative sentiment and misdirected regulation has put off investors and raised the cost of financing the privatised system.
In an interim report, former Bank of England deputy governor Sir Jon Cunliffe said “adverse political and public narrative and Ofwat’s strategy to monetary regulation have made the sector much less engaging”.
Sir Jon will publish remaining suggestions to reform water regulation subsequent month, with the goal of addressing public considerations over air pollution and customer support, whereas attracting long-term, low-risk, low-return buyers.
Water payments will rise on common by 36% over the following 5 years as firms pledge to spend £103bn on working, sustaining, and bettering infrastructure, together with £12bn on chopping sewage spills.
