Bonuses for water bosses finish – as six companies discovered responsible of most severe air pollution breaches

Bosses at six water corporations have been banned from receiving bonuses for the final monetary 12 months underneath new laws that comes into pressure 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 corporations 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.

The 9 largest water and wastewater suppliers paid a complete of £112m in government bonuses since 2014-15, although the 2023-24 whole of £7.6m was the smallest annual determine in a decade.

Ofwat can’t, nonetheless, stop 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 steered the regulator may take into account increasing its powers to make sure any remuneration is roofed by shareholder funds relatively than buyer payments.

Water suppliers have routinely defended government bonuses and pay on the grounds that awards are mandatory to draw and retain one of the best expertise to steer complicated, 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 whole remuneration to £2.3m.

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 well-liked fairness accomplice, US non-public fairness large KKR, walked away from a deal to inject £4bn regardless of direct lobbying from 10 Downing Avenue, partially due to concern over the detrimental political sentiment in direction of the water trade.

The choice got here just a few days after Thames was hit with a report positive of £123m for a number of air pollution incidents and breaching dividend fee guidelines.

Welcoming the bonus ban, the Surroundings Secretary Steve Reed mentioned: “Water firm bosses, like anybody else, ought to solely get bonuses in the event that they’ve carried out properly, actually not in the event that they’ve didn’t sort out water air pollution.

“Undeserved bonuses will now be banned as a part of the federal government’s plan to wash up our rivers, lakes and seas for good.”

Learn extra:
Water boss defends six-figure bonus
Thames Water fined £123m
Yorkshire Water fined £40m

Whitehall sources say they “make no apology” for calling out water firm conduct, regardless of considerations raised by an impartial reviewer that detrimental sentiment and misdirected regulation has delay buyers and raised the price of financing the privatised system.

In an interim report, former Financial institution of England deputy governor Sir Jon Cunliffe mentioned “detrimental political and public narrative and Ofwat’s strategy to monetary regulation have made the sector much less enticing”.

Sir Jon will publish last suggestions to reform water regulation subsequent month, with the intention 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 subsequent 5 years as corporations pledge to spend £103bn on working, sustaining, and enhancing infrastructure, together with £12bn on slicing sewage spills.