The government has launched a review of the ban on bonuses for water company bosses, after the regulator warned that some firms may be getting around the rules by paying executives in other ways. Environment Secretary Dame Angela Eagle announced the review on 12 November 2026, saying failure should not pay "whatever name the payment goes by".

The bonus ban has already stopped more than £10 million going to water bosses since it was introduced. Nine water companies triggered the ban in the last financial year alone, blocking more than £6.5 million of potential bonuses. Yet some executives have seen their total pay rise over 2025-26 despite continued poor performance, according to the government.

Why the ban is being reviewed

Ofwat, the water regulator, warned that retention payments and large, unexplained increases in base pay risk undermining the spirit of the bonus ban and eroding public trust. The regulator said it would speed up its planned review of the performance-related executive pay prohibition rule, starting with a call for evidence.

The Guardian reported that Anglian Water was singled out over retention payments worth up to £800,000 for its chief executive, Mark Thurston, despite the bonus ban. Ofwat said the growing use of fixed retention payments and substantial base-pay rises without sufficient explanation risked damaging public trust and creating a perception that companies were getting around the rule.

Helen Campbell, Ofwat's interim executive director for delivery, said it was disappointing that so many companies continued to trigger the rule through serious performance failures. "Public trust in the water sector remains low, and executive bonuses which do not reflect performance, use of retention payments and poorly explained increases in base pay contribute to that low trust," she said.

Nine companies blocked from paying bonuses

Ofwat's annual report on remuneration and governance, published on 12 November, said nine companies triggered the bonus ban rule in 2025-26: Anglian Water, Northumbrian Water, Severn Trent Water, Southern Water, South West Water, Thames Water, Wessex Water, Yorkshire Water and Dŵr Cymru. Seven of the bans related to environmental pollution, and the rest to other performance failures.

The rule requires water companies to ban bonuses for board-level directors in certain circumstances, including serious pollution failures. A one-star rating in the Environment Agency's environmental performance assessment automatically means bonuses are blocked for executives at Southern Water, Thames Water, South West Water and Yorkshire Water. The same applies to any company with a Category 1 pollution incident, which has a major, serious, persistent or extensive impact on the environment, people or property.

The latest assessment from the Environment Agency showed that pollution incidents remain far too high, with only one company achieving the top four-star rating.

What happens next

The public can have their say in Ofwat's four-week call for evidence, which closes on 10 December. The findings will inform the government's work to strengthen accountability in the water sector, including through the strengthened Water Bill.

Dame Angela Eagle said: "People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down. A wide-ranging review launching today will ensure that failure doesn't pay, whatever name the payment goes by. The bonus ban was the first step. Where there are loopholes, I want them closed."

The action follows the first joint report from the regulators, which pools their data so failing firms cannot point to a good score from one regulator while falling short with another. The Environment Secretary will also set out clear improvement actions for each water company, including tackling leakage, delivering sustained reductions in pollution incidents and improving customer satisfaction. Eight new regional water councils will give local people a say, and the government has warned companies they must deliver better value for money for struggling households at the next Price Review. For the full announcement, see GOV.UK, and for the regulator's figures see Water Magazine.