Thames Water was among six water companies forced to block bonus payouts to bosses over serious pollution incidents, as regulator Ofwat banned more than £4 million of executive bonuses under new rules on performance-related executive pay.
The powers were introduced in June as a result of concerns that the pay of water firms' top bosses was not reflecting their environmental performance. Companies are required to block annual bonuses and other awards to directors where they do not comply with the watchdog's rules, which cover pollution incidents, poor environmental practices and criminal convictions.
The six companies — Anglian Water, Southern Water, Thames Water, United Utilities Water, Wessex Water and Yorkshire Water — blocked payouts for a variety of failures, mostly involving pollution. Ofwat said that a further £2.4 million of performance-related executive pay was not required to be blocked, but should not be funded by customers.
Among the firms that triggered its rules, Thames Water had seven "category 1" pollution incidents, which are the most serious, recorded in 2024. It also breached its licence to hold a sufficient credit rating and had a one-star rating in relation to its environmental performance. This meant that no bonuses or other awards were paid to its chief executive or its former finance chief, who left in March.
Wessex Water triggered Ofwat's rule due to a criminal conviction for a sewage leak last year which killed more than 2,000 fish and resulted in a £500,000 fine. The company said it therefore decided not to pay any executive bonuses.
The blocked bonuses were only one front in the Thames Water pay scandal. The company confirmed it would not reclaim £2.5 million in bonus payments to 21 senior executives, despite Environment Minister Steve Reed calling them "outrageous". The payments were part of a package intended to reward executives for securing a £3 billion rescue loan. Originally, a so-called "retention" bonus for management was supposed to amount to up to £18.5 million, but after public pressure it was "paused and reassessed".
MPs pressed chairman Sir Adrian Montague and chief executive Chris Weston on the bonuses, including a £195,000 bonus three months into one executive's tenure and £770,000 in performance bonuses after a 40% rise in pollution incidents. In a letter to a parliamentary committee, Montague explained there had been "no discussions with the government or the regulatory authority Ofwat" about a possible reversal of the bonuses already paid. Ofwat chief David Black expressed "disappointment with the lack of transparency" by Thames Water, noting the regulator was only informed of the bonus payments during a public hearing in May. Since the recipients are not formally board members, Ofwat lacks the legal means to reclaim them — a loophole that has intensified calls for tougher legislation.