Thames Water increases bonus payments to £4m despite uncertainty over future

Thames Water has increased bonus payments to its senior management team to £4 million for the past financial year, despite the company facing potential nationalisation and struggling under more than £15 billion of debt, in a decision that has been described by MPs and consumer groups as indefensible.

The bonus payments, disclosed in the company's annual report, were awarded against performance targets that included customer service, environmental compliance and financial management. Thames Water said the bonuses reflected the achievement of "stretching targets" and were necessary to retain talent during a period of exceptional challenge.

Critics have pointed out that the company missed its leakage reduction target, was responsible for a significant number of pollution incidents and required an emergency cash injection from shareholders to avoid collapse — achievements that they argue should have disqualified management from receiving any bonus at all. The Environment Agency has separately prosecuted the company for pollution offences during the same period.

The payments are the latest in a series of revelations about executive remuneration at water companies that have been criticised for paying dividends and bonuses while failing to invest adequately in infrastructure. The government has introduced legislation that would give Ofwat, the water regulator, the power to block bonus payments at companies that fail to meet their environmental and customer service obligations, but the new powers are not yet in force.

Thames Water's future remains uncertain. The company is in discussions with the government and regulators about a restructuring that could involve significant public money, and the bonus payments will add to the political difficulty of any deal that is perceived as rewarding poor performance with public subsidy.