Water company bosses will no longer be allowed to pocket bonuses if their firms break the rules, pollute rivers or fail to stay financially afloat, under a tough new crackdown coming into force today.
The new rule, part of the Water (Special Measures) Act 2025, gives Ofwat the power to ban performance-related bonuses for top executives, when companies fail key standards on pollution, customer service, financial resilience or criminal conduct.
This is the regulator’s sharpest tool yet to hold water companies to account—and it marks a major shift in how the sector is policed. It comes just after a report slammed the sector for systemic failures.
Executives will now be banned from receiving any bonus if their company triggers any of four red flags: a breach of duties to consumers, a serious environmental offence, failure to maintain a proper credit rating or a criminal conviction.
Ofwat said it is in the public interest to apply the ban retrospectively to the current financial year, meaning bonuses for performance in 2024/25 will be under review.
Enforcement action will follow if firms fail to comply.
This new power builds on earlier rules brought in last year that stopped firms from charging customers for unjustified bonuses.
That policy alone blocked three companies from recovering £1.5 million in executive payouts.
Now, the penalties go straight to the top. If bonuses are paid in breach of the rules, Ofwat can order them to be stopped or clawed back—and if the company refuses, it will face enforcement action.
Executives whose firms cause serious pollution or earn a one-star environmental rating will be automatically disqualified from receiving a bonus.
The same goes for companies breaching licence rules on credit ratings, or those hit with criminal convictions.
Ofwat says public trust in the water sector has collapsed and this measure is about restoring credibility and forcing accountability.
The regulator will assess all bonus payments for the current financial year and announce later this year which firms—if any—have breached the rules.
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