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Water firms’ bonus bans led to higher pay and retention payouts
A bonus crackdown left Ofwat able to block only performance-related bonuses, while other payments like salary, allowances, and retention awards rose across the sector.
A pay “clampdown” on water company bosses has not curtailed compensation as intended, because England and Wales regulator Ofwat can only use powers set by parliament to block performance-related bonuses, leaving other forms of pay largely untouched, Guardian Business reports. The outlet says the Labour government’s 2024 promise to ban bonuses for polluting water executives until they cleaned up helped drive headlines, but the Water (Special Measures) Act of 2025 contained a structural gap. While Ofwat can target performance-related bonuses at the worst environmental and financial miscreants, it cannot formally stop other compensation items such as salary increases, allowance awards, and retention payments, which it says proliferated after the ban. Guardian Business cites reported pay results from English and Welsh companies, finding overall chief executive and chief financial officer pay packets rose by 1.5 percent to £25.3 million for the year, and that the rise marked the second straight year following a bonus ban. It also points to Thames Water, where the chief financial officer Steve Buck was paid £591,000 in the financial year to March, but later received a delayed £1 million signing fee at the end of July. The article describes retention payments for other executives as having been “paused” but says the broader trend has been higher overall compensation when bonuses are restricted, echoing similar “waterbed” effects seen historically in other industries.