The Government has announced further action against underperforming water companies, with tougher consequences planned for executives at firms that continue to fail on pollution, customer service and infrastructure performance.
The move comes as a landmark joint report from the Environment Agency, Natural Resources Wales, the Drinking Water Inspectorate and Ofwat reveals significant shortcomings across the sector. For the first time, the regulators have combined their data and assessments, creating a comprehensive picture of water company performance and removing opportunities for firms to highlight success with one regulator while underperforming with another.
The report is published alongside the Environment Agency’s latest Environmental Performance Assessment, which shows pollution incidents remain at unacceptably high levels. Of all water companies assessed, only one achieved the highest four-star rating.
Six Category 1 pollution incidents were recorded during 2025. These incidents are classified as causing major, serious, persistent or extensive impacts on the environment, public health or property.
In response, ministers will visit a number of sites associated with the most severe incidents to scrutinise how companies have responded and assess whether appropriate remedial action has been taken. The Environment Secretary will prioritise these locations for direct inspection.
The Government will also require every water company to implement specific improvement measures, including:
- Reducing water leakage from ageing infrastructure
- Delivering sustained cuts in pollution incidents
- Improving customer satisfaction and service delivery
- Accelerating key infrastructure upgrades
New rules introduced in 2025 already prevent executives at the lowest-performing companies from receiving bonuses.
As a result, executives at Southern Water, Thames Water, South West Water and Yorkshire Water will automatically be blocked from receiving bonuses after their companies received one-star ratings.
Bonus bans also apply to any company responsible for a Category 1 pollution incident.
However, ministers believe current measures do not go far enough. Dame Angela Eagle is now examining options to strengthen the restrictions further, amid concerns that some executives continue to receive significant rewards despite persistent operational failures.
Further details are expected in the coming weeks.
Ministers will meet chief executives from underperforming companies to demand explanations for poor performance and seek assurances that critical infrastructure projects are being delivered on schedule.
The Government has reiterated that regulators will use the full range of enforcement powers available where companies fail to meet required standards, including financial penalties and prosecutions.
Recent reforms have already strengthened regulatory oversight through the Water (Special Measures) Act 2025, which introduced rapid automatic penalties and expanded enforcement powers. Additional measures are expected through the forthcoming Water Bill, designed to ensure persistent failure carries greater consequences.
Environment Secretary Dame Angela Eagle said:
“Water companies have let the public down time and time again, and today’s report is further proof that root-and-branch reform cannot wait.
“People are sick of excuses. They want clean rivers, lakes and seas, and the certainty that every pound they pay is being invested wisely, not wasted.
“I am demanding answers from the companies that are failing, and I’ll be shining a spotlight on the worst offences around the country. We are getting on with the job of building a water system that finally works for the people who pay for it.”
The Government says the closer alignment between financial and environmental regulation represents a significant step towards a more integrated approach to water oversight, ahead of plans to establish a single regulator for water services in England and Wales.
By combining regulatory assessments, ministers aim to improve transparency, strengthen accountability and rebuild public trust in the water industry.
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