The environment secretary has declared that the “era of profiting from failure is over” after Thames Water was fined nearly £123 million by the regulator, Ofwat.
The financial sanction follows two separate investigations that uncovered failures in its wastewater operations and breaches of rules relating to dividend payments.
The penalty package includes a £104.5 million fine — the largest ever issued by Ofwat — for a “significant breach” of the company’s legal obligations in managing its sewage treatment works and wider network. This failure, Ofwat said, has caused an “unacceptable impact on the environment and customers.”
In addition to the record penalty, Thames Water must adhere to an enforcement order requiring it to rectify identified breaches relating to its wastewater operations.
Blasphemy trial to take place in the UK on Wednesday
Humanists UK comment on Assisted Dying Bill Report Stage debate
A second penalty of £18.2 million was handed down for breaking rules around dividend payments. Ofwat’s investigation concluded that interim dividend payments totalling £37.5 million made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and further dividend payments amounting to £131.3 million, made in March 2024, broke the rules.
The company is now in “cash lock up” and no further dividend payments can be paid by the company without first obtaining approval from Ofwat.
***Politics.co.uk is the UK’s leading digital-only political website. Subscribe to our daily newsletter for all the latest news and analysis.***
Ofwat’s chief executive David Black confirmed this is the “first time” the regulator has used its powers to penalise a water company for paying dividends that do not properly reflect its delivery performance for customers and the environment.
While no cash ultimately left the company from the March 2024 payment, the regulator stated there was an “extraction of value” that it will recover.
Black described the saga as a “clear-cut case where Thames Water has let down its customers and failed to protect the environment.”
He said: “Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations. The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.
“This decision provides certainty for the company for both its past failures and what we expect from the company to comply with its obligations in future.
“The company is seeking new buyers to fund its turnaround to provide better services for customers and the environment by improving operational performance and financial resilience. This provides a clear opportunity to break with the past, Thames Water will now need to correct the issues our investigation has identified.”
The fine was welcomed by the government.
Environment secretary Steve Reed said: “The government has launched the toughest crackdown on water companies in history. Last week we announced a record 81 criminal investigations have been launched into water companies.
“Today Ofwat announce the largest fine ever handed to a water company in history. The era of profiting from failure is over.”
Tim Farron, the Liberal Democrat environment spokesperson, called for Thames Water to be turned into a public benefit company.
He said: “This is shocking but hardly surprising. Thames Water has been failing for years; failing to invest, failing to maintain, and failing to deliver, and all the while it has been dumping sewage in our rivers and waterways. It has saddled customers with its debts and provided them with shoddy service in the meantime.
“This should be the final nail in the coffin for Thames Water. It needs to be turned into a public benefit company and Ofwat needs to be scrapped and replaced with a real regulator with teeth.”
Josh Self is Editor of Politics.co.uk, follow him on Bluesky here.
Politics.co.uk is the UK’s leading digital-only political website. Subscribe to our daily newsletter for all the latest news and analysis.
