Water company executives are facing a rigorous new crackdown as the government moves to close loopholes that have allowed bosses to circumvent existing bonus bans. Environment Secretary Dame Angela Eagle announced on 12 November that a comprehensive review has been launched to ensure that financial rewards for underperforming executives cannot be disguised as alternative forms of remuneration.
The government’s existing bonus ban has already prevented more than £10 million from reaching water company executives since its implementation, with over £6.5 million in payments blocked in the last financial year alone. However, despite these restrictions, recent data indicates that some executives have continued to receive total pay increases throughout 2025–26, even while their companies struggle with persistent performance failures.
Regulators at Ofwat have expressed significant concern regarding these trends. Specifically, the use of “retention payments” and substantial, unexplained hikes in base salaries have been flagged as practices that undermine the spirit of the legislation and further erode public trust in an industry currently under intense scrutiny for its environmental record.
“People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down,” said Environment Secretary Dame Angela Eagle. “A wide-ranging review launching today will ensure that failure doesn’t pay, whatever name the payment goes by. The bonus ban was the first step. Where there are loopholes, I want them closed.”
To address these concerns, Ofwat has opened a four-week “call for evidence,” inviting the public to contribute their views on the structure of executive pay. This consultation, which closes on 10 December, will provide critical insights for the government as it moves to strengthen accountability measures, including upcoming provisions in the strengthened Water Bill.
The move toward stricter oversight is bolstered by the publication of the first-ever joint report from industry regulators. By pooling data, regulators aim to eliminate the possibility of failing firms masking poor performance by selectively highlighting positive scores from one regulatory body while ignoring failures flagged by another.
This scrutiny arrives alongside the Environment Agency’s latest Environmental Performance Assessment Report, which reveals a grim reality for the sector: pollution incidents remain far too high. Only one water company in the country managed to achieve the top “four-star” rating, reflecting a widespread failure to meet essential environmental standards.
Under current rules, a one-star rating automatically triggers an executive bonus ban. This currently affects Southern Water, Thames Water, South West Water, and Yorkshire Water. The same penalty applies to any company responsible for a Category 1 pollution incident—an event defined by its major, serious, or persistent impact on the environment, public health, or property.
Beyond pay reform, the government has signaled that it intends to demand significant operational improvements. The Environment Secretary is setting out explicit mandates for water companies, requiring sustained reductions in pollution incidents, a drastic improvement in the management of leakage, and higher standards for customer satisfaction.
These initiatives form the backbone of a broader government strategy to return control of the water sector to the public. In addition to the bonus review and the new Water Bill, the government has set strict expectations for the upcoming Price Review, insisting that companies prioritize value for money for households facing cost-of-living pressures. Furthermore, eight new regional water councils are being established to provide local communities with a direct voice in how their water infrastructure is managed and held to account.
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