Thames Water plans to increase executive pay to avoid bonus cuts

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Thames Water has threatened to raise workers’ wages if the UK government goes ahead plans to restrict bonuses for water managers.

The tool, which plans to raise debt by at least a third for the 16mn customers it serves in and around London, has warned the water regulator of its plans to raise the basic wage, according to a report by the company’s management committee to the board of Thames Water.

“We have made it very clear to Ofwat that, if it goes ahead with its proposals, it is very likely that basic pay will need to be increased to cover the loss of performance-related pay schemes,” it read. December 3 report on. Jon Haskins, chief risk and compliance officer at Thames Water.

“We also highlight the impact the proposals will have on attracting, retaining and promoting much-needed talent across the sector, and the importance of this for attracting investment,” the report added.

The plan to freeze salaries and bonuses for underperforming water companies is part of the government’s special steps law that is currently going through parliament and is expected to be approved this year.

The new law would allow Ofwat to ban performance-related pay entirely in certain circumstances. It will also make managers and directors prosecuted where a crime, such as obstructing an investigation by environmental authorities, is committed with their consent, or because of their negligence.

Currently, the regulator says it can force shareholders rather than consumers to pay bonuses to underperforming companies. In 2024 Ofwat intervene in this way and three companies, including Thames Water.

This bill will also enable managers and executives to be prosecuted when a crime such as sewage pollution is committed with their consent or because of their negligence.

When the EU introduced a bank bonus cap after the financial crisis, many banks responded by raising base salaries. The UK has since he was uncapped as part of the post-Brexit drive to strengthen the City of London.

At Thames Water, chief executive Chris Weston, on a £2.3mn salary, found £195,000 bonus for three months of work after joining in January last year. This took his total earnings from January to the end of March 2024 to £437,000. His predecessor Sarah Bentley turned down a bonus in 2022-23.

Thames Water’s plan to push back against new bonus rules comes despite Ofwat allowing the company to raise customer bills by up to £588 over the next five years, despite a poor pollution record and leaks.

The company, which is struggling with £19bn of debt, has warned it could run out of cash next month and is scrambling to avoid it. temporary renationalisation.

Thames Water has agreed a £3bn loan with creditors, which must be confirmed by the courts. The company’s top tenants, including the hedge fund Elliott, have given the company’s management team a lot of money. “saving” incentives.

Higher pay for executives has become a lightning rod for anger at Britain’s 16 private water companies, which are accused of using debt to pay dividends while failing to invest enough in infrastructure. leading to sewage pollution, water cuts and leaks.

In general, English water companies have paid out £83bn in dividends in the 34 years since privatisation, it has amassed more than £74bn in debt, according to a Financial Times investigation.

Charlie Maynard, a Liberal Democrat MP, said “the focus on freezing bonuses distracts from the fundamental problem that these companies are drowning in debt”.

Ofwat said in a statement that it would “proceed with further measures under the authority’s wage control powers set out in the Government’s Water (Special Measures) Act”.

Thames Water declined to comment. The Department of Environment, Food and Home Affairs did not immediately respond to a request for comment.