Water giant suspends £1m executive payouts after ministers slam ‘reward for failure’ as public anger rises.

 Thames Water has bowed to mounting political pressure and public outrage by pausing its controversial executive bonus scheme, which could have seen top bosses pocket up to £1 million each.

The decision follows a sharp rebuke from Downing Street, which said it was “clearly not acceptable” for executives to “reward themselves for failure” while the utility faces financial ruin and widespread criticism over environmental failings.

At the centre of the row is a “retention scheme”—intended to secure the loyalty of senior management amid the company’s £3 billion emergency refinancing. The payouts, equating to 50% of executives’ base salaries, were on top of annual bonuses and standard pay.

Environment Secretary Steve Reed had earlier accused Thames Water of trying to sidestep forthcoming restrictions on bonus payments to water firm bosses by “calling their bonuses something different.” Addressing MPs on Tuesday, he declared: “They are trying to circumvent the rules. It’s a disgrace.”

Following the backlash, Thames confirmed the scheme had been suspended. “The board has decided to pause the retention scheme while we await further guidance from Ofwat,” a spokesperson said. “It has never been our intention to be at odds with the government’s ambition to reform the water industry.”

The decision appears to be a pre-emptive retreat ahead of possible new rules from Ofwat, which may soon gain the authority to block all forms of executive bonuses in water firms—particularly those struggling with debt or performance failures.

Thames Water, which supplies a quarter of the UK population, has become the poster child for mismanagement in the sector. It’s under intense scrutiny over repeated sewage spills, leaks, and poor customer service. Public trust in the company is at rock bottom.

In March, the firm narrowly avoided collapse by securing a £3 billion rescue loan. But its long-term future remains in question. It still holds around £20 billion in debt and has asked lenders to accept significant write-downs to reduce its liabilities. Without further support, it is projected to run out of cash by mid-April.

The company insists that even in the event of financial failure, water and waste services will continue uninterrupted for households in London and across southern England. It employs 8,000 people.

Responding to Thames Water’s U-turn, Steve Reed said he was “very happy” to see the retention scheme scrapped, calling it “the wrong thing to do” and “offensive to customers’ sense of fair play.”

Earlier on Tuesday, Thames chairman Sir Adrian Montague attempted to clarify remarks he had made to MPs last week, when he claimed lenders had “insisted” on the retention scheme. Facing criticism, Montague said he may have “misspoken,” adding that competition for top executives remained fierce. “We have to provide the right sort of packages to these people,” he said, “otherwise the head hunters come knocking.”

Despite Thames insisting its retention scheme was not funded by customer bills, the public remains unconvinced. Many see the attempted bonus payments as another symbol of an industry out of touch with reality.

In November, Ofwat barred Thames, Yorkshire Water, and Dŵr Cymru Welsh Water from using customer funds to pay out £1.6 million in bonuses to senior staff.

As pressure continues to mount, both the government and regulator are now expected to move swiftly to tighten bonus rules across the industry.