Nine water companies across the UK have been banned from using customer money to fund “undeserved” bonuses for their top bosses.

Industry regulator Ofwat has stepped in to stop water companies paying out £6.8 million in bonuses using customer money.

The regulator halted water companies that cannot show that bonusses are sufficiently linked to performance from using customer cash to fund the payouts.

Debt-laden Thames Water is among three firms – also including Yorkshire Water, and Dwr Cymru Welsh Water – which were directly blocked from allowing customers to pay £1.55 million of bonuses.

Ofwat said a further six companies had voluntarily decided not to push the cost of executive bonuses worth a combined £5.2 million onto customers, with shareholders instead paying.

(Image: Daniel Leal-Olivas/PA)

It added it would otherwise have moved to block the payouts.

David Black, chief executive of Ofwat, said: “In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability.

“While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.”

Ofwat said new rules on water company bonuses and dividend payouts to shareholders were “beginning to bite” in their first full year since being introduced.

In blocking the awards, Ofwat will instead adjust costs for the companies so that they cannot recover it from customers.

It revealed that Thames Water – more than £16 billion in debt and at the centre of growing public outrage over pollution and rising bills – was planning to use customer cash to pay £770,000 in bonuses for its chief executive Chris Weston and chief financial officer Alastair Cochran.

Action was also taken against £616,000 worth of payouts for top bosses at Yorkshire Water and £163,000 of bonuses at Dwr Cymru Welsh Water.

Secretary of State for Environment, Food and Rural Affairs Steve Reed said: “It is disgraceful that half of water companies have given out unjustifiable and unmerited bonuses.

“That is why this Government is introducing urgent legislation to ban the payment of unfair bonuses to polluting water bosses so payouts of this kind can never happen again.

“But there are deeper issues that need long-term solutions, which is why we have launched the largest review of the sector since privatisation.”

A Dwr Cymru Welsh Water spokesperson said: "Some of our operational performance is not as good as we or our customers expect, and we are working hard to drive the improvements needed.

“Our Business Plan for 2025-30 will be the company’s largest ever in our services - over £4 billion, with £2.5bn total in our wastewater and environmental services - subject to Ofwat approval.

“Today's report recognises the comparatively low level of Dŵr Cymru’s annual performance related pay and that no long-term incentive payments were made last year, reflecting our poor performance in 2023/24.

“The performance related pay did, however, reflect other elements of good performance including strong customer service and financial performance.

“We will take the necessary action as outlined in Ofwat’s report."