Southern Water executives face immediate bonus ban under Labour’s new Water (Special Measures) Act 2025, preventing performance-related pay when companies fail environmental and customer standards, with measures applying retrospectively from April 2024.
The legislation prohibits water firms including Southern Water from paying bonuses to senior management when performance standards are not met. The restrictions take effect immediately following this week’s introduction of the government’s new water legislation.
The company has distributed over £5.4 million in executive bonuses and incentives during the previous ten years, with £312,000 paid out in the last financial year alone.
Water companies that successfully meet Ofwat’s regulatory requirements remain eligible to award executive bonuses under the new framework.
The Department for Environment, Food and Rural Affairs confirmed the legislation forms part of broader efforts to tackle pollution problems and infrastructure deficiencies throughout the water sector.
Portsmouth South MP Stephen Morgan praised the development, stating: “Sewage contamination in Portsmouth has damaged our local environment for far too long.
“I have consistently campaigned against sewage pollution and called for an end to unjustified water executive bonuses.
“This Labour administration is addressing the environmental crisis the previous Conservative government neglected. We are implementing immediate bonus restrictions and ensuring proper investment to restore our coastal waters.”
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A Southern Water representative commented: “We acknowledge the government’s decision and are awaiting comprehensive details regarding its impact on our current performance-based compensation structure, which is already linked to customer satisfaction and environmental improvements.
“Shareholder funds, not customer payments, finance any bonuses, with independent committee oversight.”
The government describes the Act as part of comprehensive reform measures, incorporating £104 billion in planned private sector investment over five years to reduce sewage discharges and enhance water quality across Britain’s rivers, lakes, and coastal areas.
