Labour’s promise to ban bonuses for executives at polluting water companies may have been sidestepped, critics say. The Water (Special Measures) Act 2025, one of the first major laws passed by the new government, was designed to block performance-related pay at firms that repeatedly dump sewage into England’s waterways. However, loopholes have allowed Thames Water to pay millions in bonuses to managers, prompting accusations that the government has been “outwitted”.
Thames Water paid £2.46m in bonuses to 21 managers on 30 April, before the ban took effect, and has refused to claw the money back. The company paused its management retention plan (MRP) but has not ruled out further payments: managers are due the same sum again in December and a further £10.8m next June. Environment Secretary Steve Reed told MPs that Thames appeared to be “circumventing that ban, calling their bonuses something different so they can continue to pay them”.
The act only covers senior executives such as the chief executive, chief financial officer and chair. Chris Weston, Thames’ CEO, voluntarily declined his 300% bonus, calling it a “distraction”. However, the company’s chair, Adrian Montague, had earlier told MPs that bonuses linked to a £3bn loan were necessary to retain staff in a competitive market. After Reed intervened, Montague conceded he may have misspoken, and Thames said the bonuses were paused, not withdrawn.
Water campaigner Feargal Sharkey, who campaigned with Labour during the election, said the government had been “outwitted and outmanoeuvred by the water companies”. He added: “Driving forward eye-catching policies designed to do nothing more than grab headlines is no way to fix the biggest problem facing this country.” Documents released to the Environment, Food and Rural Affairs committee show Thames hired top consultants and law firms, including Rothschild & Co, Linklaters and Mercer, to design a retention programme that was legally sound and would pass regulatory scrutiny.
