More than £4m in potential bonuses were blocked by Ofwat’s new rule on water bosses’ performance related pay in the last financial year, the water regulator has revealed.

Ofwat published the figure in its latest performance related executive pay report, which detailed how the new rule on performance related executive pay (PRP) has worked since it was introduced in June.

The new rule on PRP, which is one of the powers given to Ofwat by the Water (Special Measures) Act 2025, has been applied for the first time alongside the PRP cost recovery mechanism, which ensures that customers do not fund bonuses which do not meet Ofwat’s expectations.

Six water companies - Anglian Water, Southern Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water – triggered the bonus ban rule for 2024/25 for a variety of performance failures, mostly involving pollution incidents. Ofwat said that all companies correctly complied with the rule by not giving their directors an annual bonus and other relevant performance related pay.

“While progress has been made, further action is needed by some companies to ensure their long-term financial resilience,” an Ofwat statement said.

Ofwat has also reported that dividend policies and transparency improved last year. Nine companies did not declare a dividend for 2024/25, in some cases to support financial resilience and growth.

Thames Water, Southern Water, and South East Water are currently in cash lock-up under their licence and cannot pay dividends without Ofwat’s consent. In May, Thames Water was fined £18.2m for failing to link a dividend payments to company performance.

“It is essential that water companies maintain financially resilient structures to ensure that they can raise the level of finance necessary and withstand potential downside risks,” the regulator added.

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