The Government has launched a review into whether water company executives are receiving alternative payments or increased salaries that undermine restrictions on bonuses, after regulator Ofwat raised concerns about retention payments and unexplained increases in basic pay.
Environment Secretary Dame Angela Eagle called for a wide-ranging examination of the existing rules on 12 November 2026. Ofwat confirmed that nine companies triggered the prohibition on performance-related executive pay in 2025–26, blocking more than £6.5 million in potential bonuses. More than £10 million has been blocked across the first two years of the rule.
Nine companies triggered restrictions
Ofwat identified Anglian Water, Northumbrian Water, Severn Trent Water, Southern Water, South West Water, Thames Water, Wessex Water, Yorkshire Water and Dŵr Cymru Welsh Water as companies that triggered the rule during 2025–26. The regulator said all nine correctly applied the existing prohibition.
Why alternative payments are under scrutiny
Ofwat has identified changes in remuneration practices that could undermine the purpose of the bonus ban, including retention payments and large increases in basic salaries that have not been adequately explained. Such arrangements are not automatically unlawful. The review has not established that individual companies breached the existing prohibition.
Poor environmental performance
Southern Water, Thames Water, South West Water and Yorkshire Water received one-star environmental performance ratings, which automatically trigger restrictions on executive bonuses. A Category 1 pollution incident can also trigger the rule. The Environment Agency’s latest assessment found that only one company achieved the top four-star rating.
What the Government and Ofwat will do next
Ofwat opened a four-week call for evidence on 12 November, inviting customers, companies, investors, environmental groups and others to comment on how the prohibition could be improved. Responses close on 10 December 2026. Evidence will inform the accelerated review and any subsequent consultation on proposed rule changes.
No new prohibition has been introduced
The existing bonus restrictions remain in force. The review does not itself ban retention payments or increases in basic salary. Any additional restrictions will depend on the regulator’s findings and the decisions taken after consultation.
Read the Defra announcement, Ofwat findings and public call for evidence.