Water bosses face review of pay and bonuses after Yorkshire Water chief resigns

Water company bosses could face tighter restrictions on their pay and bonuses as the Government launches a review into potential loopholes in its ban on rewarding poor performance.

Environment Secretary Dame Angela Eagle announced the review on Thursday, November 12, warning that executives must not be able to get around the rules by disguising bonuses as other forms of payment.

The bonus ban, introduced in June 2025, has prevented more than £10 million from being paid to water company bosses, according to the Government.

Nine water companies triggered the ban in the last financial year, with more than £6.5 million in potential bonuses blocked.

However, concerns have been raised that some executives have still seen their overall pay increase despite their companies’ poor performance.

As such, Ofwat will begin a wide-ranging review of water boss pay and bonus ban loopholes.

The review will examine how the rules operate and whether further restrictions are needed to prevent companies from rewarding executives through alternative payment arrangements.

Yorkshire Water is among four companies automatically affected by the restrictions after receiving the lowest possible environmental rating.

The Environment Agency downgraded the company from two stars to one star in its latest assessment, published on October 29. The rating means Yorkshire Water is classed as a poorly performing company

The company’s chief executive, Nicola Shaw, announced on October 30 that she would step down, after four and a half years in the role. Her announcement came a day after the downgrade.

She is due to leave the position on January 1, 2027, when Nicola Medalova will take over as chief executive. Ms Medalova joined the company as chief executive-designate on November 2.

Ms Shaw has also faced scrutiny over payments from Yorkshire Water’s parent company, Kelda Holdings.

It was reported that she received payments of £660,000 in each of the last three financial years from the Jersey-registered parent company. The payments attracted criticism from MPs, although Yorkshire Water said they were made by shareholders rather than billpayers.

These payments were separate from the performance-related bonuses covered by the Government’s ban.

Dame Angela 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.”

Ofwat’s four-week call for evidence will close on December 10, with the findings expected to inform changes to the rules in early 2027.

The restrictions apply to water companies whose executives oversee serious pollution incidents, receive the lowest environmental rating, breach legal duties to customers resulting in a financial penalty, lose their required credit rating or are convicted of an offence.

The Government also said it would set out improvement actions for individual water companies, including reducing leakage and pollution and improving customer satisfaction.

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