Six water companies have been banned from paying bosses bonuses under new legislation.

The Water Act comes into force today (6 June), and includes tougher measures on paying bonuses to senior executives in companies that do not meet environmental standards, are not financially resilient or have been convicted of a criminal offence.

Six firms have been banned from paying bonuses: Anglian Water, Southern Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water.

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The ban is backdated to April 2024, which means the water regulator Ofwat can force companies to claw back bonuses that have already been paid.

Water companies paid £7.6 million in bonuses in England in the last year, the government said.

According to environment secretary Steve Reed, water company executives “should only get bonuses if they’ve performed well, certainly not if they’ve failed to tackle water pollution”.

An independent review by the Water Commission this week found that public trust in water companies had been eroded by “pollution, financial difficulties, mismanagement and infrastructure failures”.

The review, led by former deputy governor of the Bank of England Sir Jon Cunliffe, said that the UK’s water system has suffered “deep-rooted, systemic and interlocking failures over the years”.

Water UK, the trade association for the water industry, said in response to the review: “Everyone agrees that the water system is not working.

“We hope this report will be a starting point for the fundamental reforms the sector needs. We need a less complicated system which allows investment to get quickly to where it needs to go.

“In the meantime, companies are focused on investing a record £104 billion over the next five years to secure our water supplies, end sewage entering our rivers and seas and support economic growth.”

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