Water Regulator Moves to Close Executive Pay Loopholes as Bosses Evade Bonus Bans

Britain’s water regulator is rushing to tighten rules on executive pay after accusing water suppliers of undermining statutory restrictions through substantial fixed awards, base salary hikes, and retention packages. Ofwat confirmed on Thursday that nine water companies across England and Wales have been barred from paying bonuses for the 2025-26 financial year. Seven of those bans were handed down due to serious environmental pollution offences. The overall ban on executive bonuses was originally brought in by The Labour government following widespread anger over raw sewage discharges entering rivers and coastal waters. Despite the restrictions, Ofwat warned that water companies risk damaging public trust by using alternative financial arrangements to bypass the spirit of the law. The regulator highlighted several substantial retention packages, including up to £800,000 intended for Anglian Water chief executive Mark Thurston.

Regulator Targets Substantial Retention Packages

Ofwat singled out Anglian Water for severe criticism, noting that cash awards offered to Thurston gave the impression that the company was replacing prohibited performance-related pay without technically breaching current rules. As a result, Anglian Water will now be subjected to heightened monitoring over its governance setup. Other major pay arrangements flagged by the regulator include potential retention payments of £1m for Thames Water’s chief financial officer, £1.5m for Northumbrian Water chief executive Heidi Mottram, and £1.7m for United Utilities chief executive Louise Beardmore. Thames Water also drew sharp criticism for raising executive base pay and paying chief executive Chris Weston a previously deferred bonus of £99,000. Ofwat ruled that Thames Water’s future owners must cover Weston’s payout rather than passing the cost onto bill payers. In total, Ofwat stated that the bonus restrictions blocked an additional £6.5m in executive payouts across the affected firms, which also include Yorkshire Water, Severn Trent Water, Southern Water, South West Water, Wessex Water. And Dŵr Cymru (Welsh Water).

Ministers Pledging Broader Clampdown

Environment Secretary Angela Eagle announced a full review to plug regulatory gaps and stop underperforming executives from receiving large payouts through alternative channels. “The bonus ban was the first step. Where there are loopholes, I want them closed,” Eagle said, emphasizing her stance that “failure doesn’t pay.” Ministers are currently reviewing whether payments made to directors by parent entities should also be brought under the formal bonus ban. Helen Campbell, Ofwat’s interim executive director for delivery, confirmed the regulator is speeding up its review process after blocking £10m in total executive payments over the past two years. Campbell noted that poorly justified base pay increases and retention awards continue to erode customer confidence. Outside the primary group of nine, South East Water wasn’t handed a direct bonus ban. But Ofwat ruled its shareholders must absorb any future bonus costs following severe supply outages that left tens of thousands of homes without running water. The regulator also cited South Staffs Water over a lack of transparency in its executive pay reporting.