Thames Water, which serves over 16 million customers across the London area and Thames Valley, has warned that it may raise the base pay of its executives if industry regulator Ofwat moves forward with plans to limit bonuses for the water company’s top bosses. The proposal has already sparked widespread criticism, with some labeling it unscrupulous and self-serving. The ongoing scrutiny of Thames Water’s executive compensation highlights the tensions between regulatory bodies, consumers, and the company itself.
Why Does Thames Water Threaten to Increase Executive Pay?
In a recent report submitted to Ofwat’s board by Thames Water’s regulatory strategy committee, the company argued that reducing executive bonuses could make it difficult to attract the necessary talent to the water sector. The report highlighted concerns about the long-term impact on the company and the wider industry.
“We have made it very clear to Ofwat that, if it proceeds with its proposals, it is highly likely that base pay will need to be increased to compensate for the loss of performance-related pay plans,” stated Jonathan Haskins, Thames Water’s Chief Risk and Compliance Officer. “We also highlight the impact the proposals will have on attracting, retaining and motivating critically needed talent across the sector, and the importance of this for attracting investment.”
Why Are Bonuses Causing Public Anger?
The debate over executive pay comes at a time when water companies, including Thames Water, are under intense public scrutiny. Over the years, water firms have faced increasing public anger over issues like executive bonuses, leaks, and sewage discharges. These problems have drawn political backlash, especially during a period when many people are facing rising living costs and financial difficulties.
Chris Weston, Thames Water’s Chief Executive, defended the bonuses, including one of £770,000 that was awarded to him and the company’s finance chief. Weston was also awarded £195,000 for his first three months at Thames in early 2024. In comments made last month, Weston emphasized that the company needed to offer “competitive packages” to attract top talent.
“We need to offer competitive packages to attract the best people to ensure we’re in the best position to serve our customers,” Weston said, defending the hefty payments.
What Does Feargal Sharkey Think About Thames Water's Demands?
Critics have strongly condemned Thames Water’s stance, with Feargal Sharkey, the former lead singer of the Undertones and an environmental campaigner, accusing the water company of attempting to sidestep accountability with what he described as “ineffectual, cheap political posturing.”
“The simple truth is if they want to change the culture, they need to change the whole ethos of Ofwat and the water companies,” Sharkey said. “Ofwat can already set limits on CEO pay by setting an enforcement order. CEOs are always going to try to make as much money for themselves as they can without a care about the environment. The government tried limiting bonuses in the City already and that didn’t work as they just massively inflated their salaries. The same is happening here.”
How Has Ofwat Responded to Thames Water's Actions?
The tensions between Thames Water and the regulator Ofwat have escalated following an £18.2m penalty imposed on the company in December 2024. The fine was a result of Thames Water breaching dividend rules for shareholder payouts made in 2023 and 2024. Meanwhile, Thames Water has announced plans to raise customer bills by a third over the next five years, further aggravating public concern.
Gary Carter, the national officer of the GMB union, called the company’s actions “unscrupulous” and “utterly abhorrent,” highlighting the disconnection between the rising cost for consumers and the growing payouts to top executives.
“Thames Water has no shame and scant regard for public opinion,” Carter said. “Customers’ bills are going up and the money is going to fat cat bosses. It’s unscrupulous and utterly abhorrent.”
What Is the Government's Position on Water Company Regulation?
The British government is currently moving forward with legislation aimed at tightening regulation of the water industry. The proposed law seeks to ban the payment of bonuses to the worst-performing water companies and introduce personal criminal liability for water executives responsible for pollution.
Ofwat, the industry regulator, has the authority to ensure that customers do not foot the bill for excessive executive bonuses, instead requiring investors to cover the cost. The regulator recently used this power in November to prevent Thames Water, Yorkshire Water, and Dŵr Cymru Welsh Water from awarding “undeserved” bonuses.
Why Is Thames Water Seeking Emergency Funding?
Amid the mounting controversy, Thames Water is seeking a £3bn emergency funding package, which it claims is essential to prevent the company from falling into temporary nationalisation. The company has described this financial package as vital to its long-term stability and ability to meet its obligations.
However, a recent report revealed that Thames Water had intentionally diverted millions of pounds originally pledged for environmental cleanups towards other expenses, including bonuses and dividends. This further fueled criticisms of the company’s financial management and its priorities regarding the environment.
As the situation continues to unfold, the focus remains on the ongoing struggle between Thames Water, the regulator Ofwat, and the wider public. The outcome of this conflict could have significant implications for the future of executive pay and the broader regulation of the water industry in the UK.
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