The chief executives of the 10 largest water and sewage companies in England and Wales saw their combined total pay packages fall 27 per cent last year, as they attempted to address mounting public anger over sewage pollution and water leakage.
Overall, the average total remuneration of the 10 bosses was £1.1mn, down from £1.5mn the previous year, according to an analysis of the financial statements of the regulated companies in the year to March 31, 2023.
The bosses of five companies — Thames Water, Welsh Water, Yorkshire Water, South West and Southern Water — gave up their bonuses in recognition of the pollution issues, while the remuneration of others fell as they missed performance targets. None of the 10 chief executives has so far announced plans to renounce bonuses for this current financial year.
Just two of the 10 — Peter Simpson at Anglian Water and Heidi Mottram at Northumbrian Water — received increases to their pay last year, according to the statements.
The overall 27 per cent drop in pay contrasts starkly with the 16 per cent increase pocketed by FTSE 100 chief executives over the year, according to analysis from the High Pay Centre last week.
But campaigners and academics said it remained high, given that the water monopolies have no competition, benefit from a guaranteed income stream and demonstrate little innovation.
Sir Dieter Helm, professor of economic policy at Oxford university, said: “Water companies are very different from equity-driven, higher-risk, internationally-facing businesses.”
Executive pay has become a lightning rod for public anger against the water monopolies, which are accused of letting unknown quantities of raw sewage pour into rivers and coastal waters.
The greatest reductions in pay were experienced by two of the highest-paid water company chiefs. Liv Garfield, the boss of Severn Trent, received a total pay package of £3.2mn in the year to 31 March 2023, down from £3.9mn in the prior period. This was due to reductions in her annual bonus and long-term incentive plans, both of which are related to regulatory targets. Nevertheless, her total remuneration was 73 times the average employee earnings at the company.
“Severn Trent is consistently recognised by its regulators for its sector-leading performance for both our customers and the environment, including this year,” the company said.
Steve Mogford, who retired as chief executive of United Utilities on 31 March, earned £2.3mn, down from £3.2mn. He also made £1.4mn in share sales in the months before he was replaced by new CEO, Louise Beardmore.
United Utilities, which serves the north-west, said Mogford had waived the environmental performance part of his bonus despite achieving targets in “recognition that more needs to be done on reducing storm overflows”.
Two chief executives saw their pay rise. Peter Simpson, the boss of Anglian Water, received a 6.6 per cent pay rise from £1.3mn to £1.4mn, including a £302,000 bonus. The company was slapped with a £2.65mn fine earlier this year after being found guilty of tipping untreated sewage into the North Sea in 2018.
Anglian Water said: “The majority of the increase in Peter Simpson’s remuneration is the result of deferred payments from previous years and reflects previous good performance.”
Heidi Mottram, chief executive of Northumbrian Water, pocketed a £215,000 bonus, up from £130,000 the year prior, taking her total pay package up 21 per cent to £781,000.
The furore over pay comes as several companies face financial pressure after racking up more than £60bn of debt and paying out more than £70bn in dividends since being privatised more than three decades ago.
David Hall, a visiting professor at Greenwich University, said: “CEO pay is really a minor issue, and shouldn’t distract us from the continued extraction of dividends, interest on shareholder loans, and lack of new capital from shareholders.”
Water companies are due to ask regulator Ofwat next month if they can raise household water bills up to 49 per cent between 2025 and 2030 to pay for much-needed infrastructure upgrades. Household water bills have already risen an average of 7.5 per cent this year, meaning they stand at £448 a year.
Ashley Smith, chair of campaign group of the Windrush Against Sewage, said the requests for higher bills should be resisted. “Chief executives are running monopoly companies that have been shown to have been polluting illegally on an epic scale yet they still collect phenomenal pay packages and have no other source of income other than customer bills.”
Ofwat said executive remuneration “must align to company performance, for customers and the environment”.
Some of the water utilities’ holding companies have not yet released their accounts, so there could be extra payments for chief executives who also manage non-regulated companies within their group.
As well as an annual performance bonus, several companies also offer additional bonuses tied to long-term incentive plans (LTIPs), often paid three years in arrears, depending on the company meeting performance targets.
The LTIP can add anywhere from one to three times fixed salary and is often the biggest portion of total remuneration. However, due to the three-year deferment, the exact figure for the last financial year’s performance will not be reported until three years’ time.
Nicola Shaw, chief executive of Yorkshire Water, said earlier this year: “I understand the strength of feeling about the issues linked to river health which is why I’ve decided that this year I won’t be accepting a bonus.”
Thames Water, Southern Water, Northumbrian Water, South West Water, Welsh Water and Wessex Water declined to comment, as did Water UK, the industry lobby group.