Thames Water banned from using customer cash to reward bosses

Rory Poulter
·3-min read
A white Thames Water Van with a Thames Water logo
-Credit: (Image: Getty)


Nine water companies, including Thames, have been banned from using £1.6 million raised from customers’ bills to pay big bonuses to executives. The move by industry regulator Ofwat will be welcomed by customers, who face inflation busting increases in bills to combat leaks, sewage spills and build new infrastructure, including reservoirs.

The ruling means that Thames Water will be blocked from clawing back some £770,000 in bonuses paid to its bosses from customers. Ofwat said shareholders, not bill payers, should cover the bonuses paid to Thames Water executives, including its chief executive, Chris Weston.

Mr Weston was hired in January to try to turn around the fortunes of a company drowning in debts and he was subsequently awarded a bonus of £195,000 for his first three months at the company, taking his total pay for the period to £437,000. In total, nine companies won’t be allowed to use customer money to fund bonuses, but Ofwat only needed to officially block three after the rest complied voluntarily. The other two forced to make a change were Yorkshire Water with bonus payments of £616,000; and Dŵr Cymru Welsh Water where the figure was £163,000.

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Ofwat chief executive, David Black, said: “In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability. We have stepped in to protect customers' interests, we will continue to do so. The announcement today in terms of blocking chief executive bonuses from being recovered from customers is part of that.”

The Thames Water Ltd. company logo on protective barriers
The ruling means that Thames Water will be blocked from clawing back some £770,000 in bonuses paid to its bosses from customers -Credit:Getty

The future of Thames Water has been left in doubt after shareholder turned their back on the business in March this year, declaring it “uninvestible.”

The firm is now searching for new investors to provide £3.3 billion in new equity over the next five years to ensure it can fund a massive programme of improvements to its pipe network. Separately, Ofwat has been investigating whether to fine the firm over allegations that it broke the rules by paying dividends to its parent company while it was failing to deliver on promised work to combat leaks and sewage spills.

Environment Secretary Steve Reed has described the fact that half of water companies have been handing out bonuses as "disgraceful". As a result, the government introduced urgent legislation to give Ofwat new powers to block bonuses entirely.

Mr Reed said: “It is disgraceful that half of water companies have given out unjustifiable and unmerited bonuses. That is why this Government is introducing urgent legislation to ban the payment of unfair bonuses to polluting water bosses so payouts of this kind can never happen again.”

He also recently commissioned a review of the sector by former Bank of England deputy governor Sir John Cunliffe.

In Ofwat’s latest financial resilience report published today, it named Thames Water, South East Water and Southern Water as being in need of action to address big holes in their finances. This means that the three firms are subject to high priority monitoring and must seek approval before paying out dividends.

Tim Farron MP, Liberal Democrat environment spokesperson, welcomed the action by Ofwat but said it’s “an utter disgrace” that Thames has been paying out a bonus at all. He said: “It is a welcome shock that Ofwat is actually acting to protect bill-paying customers for once after proving completely toothless in cracking down on these polluting firms for years.”

River Action chief executive James Wallace said moves to block the bonus payouts were “long overdue”. He said: “It is about time Ofwat put an end to water company chief executives enriching themselves at the expense of hard-pressed bill payers.”

A Dwr Cymru spokesperson said the firm would "take the necessary action as outlined in Ofwat’s report”. There was no comment from the other firms.

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