Water companies blocked from paying £4m in government bonuses as households see payments hiked

Britain’s water regulator has blocked £4million in executive bonus payouts over the last year amid efforts to crack down on poor performance in the sector.

Ofwat said on Wednesday six water firms have breached its bonus ban rules this year, as operators continued to fail to prevent critical pollution incidents, despite intense public and political pressure.

It comes as households are being whacked with enormous water bill hikes to fund critical infrastructure upgrades, which have been underfunded for years as some operators have prioritised dolling out shareholder payouts and executive bonuses.

Meanwhile some firms, such as Thames Water, have built up enormous debt piles and now risk collapse. 

Ofwat introduced a performance-related executive pay recovery mechanism last year in response to public and political dissatisfaction with the water sector’s failures.

The regulator said Anglian Water, Southern Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water had all triggered the bonus ban rule over the last year for a ‘variety of performance failures’.

Households are funding major infrastructure upgrades with substantial bill hikes 

Most involved ‘category 1’ pollution incidents – the most serious kind of environmental failure.

All six firms were prevented from giving their directors an annual bonus and other relevant performance-related pay. 

Thames Water highlighted for criticism  

Thames Water, which recently organised a payment plan to service pollution-related fines, was responsible for seven category 1 pollution incidents over the year.

It was highlighted for particular criticism by the regulator, which said the water group’s ‘lack of transparency’ over its ‘management retention plan’ was ‘unacceptable’.  

Ofwat said Thames’ opacity ‘speaks to a broader issue of transparency in executive remuneration across the water sector’. 

It added: ‘This is why we intend to consult on changes to annual regulatory reporting requirements to ensure companies share full details of what executives receive, both from the regulated and associated companies. 

‘In relation to Thames Water, we are closely monitoring any further developments on the MRP scheme as well as other remuneration schemes the company may plan in the future.’

‘Progress has been made’ 

However, Ofwat claims dividend policies and transparency has broadly improved over the last year, with nine companies not declaring shareholder payouts – ‘in some cases to support their financial resilience and growth’.

Ofwat said: ‘While progress has been made, further action is needed by some companies to ensure their long-term financial resilience.

‘Looking ahead, a significant increase in investment across the water sector is required.

‘Delivering this scale of investment requires significant new funding – both debt and equity.

‘It is essential that water companies maintain financially resilient structures to ensure that they can raise the level of finance necessary and withstand potential downside risks.’