Thames Water to be blocked from paying bonuses out of £3bn loan

Ministers to stop senior staff receiving handout from emergency funds

- Helena Horton Anna Isaac

Ministers plan to use new powers to block bosses from Thames Water taking bonuses worth hundreds of thousands of pounds as the company fights for survival, the Guardian can reveal.

Britain's biggest water company admitted this week that senior managers were in line for "substantial" bonuses linked to an emergency £3bn loan. Thames said the payouts were vital to retain staff and prevent rivals from "picking off" its best employees.

But the disclosure provoked fury - the company has said its finances are "hair raising" and that it came "very close to running out of money entirely" last year. Thames is in a desperate race to raise funds and persuade the water regulator to let it off hundreds of millions of pounds of fines, or risk being renationalised.

Government sources said these bonuses could be banned as soon as next month, and any paid for the last financial year, between April 2024 and April 2025, could be clawed back. The environment secretary, Steve Reed, said that "the days of profiting from failure are over".

It emerged this week that the company was planning to use part of a £3bn emergency loan, which was meant to stabilise Thames's finances and save it from collapse, to pay bonuses for senior executives. Thames's chair, Sir Adrian Montague, told MPs on the environment, food and rural affairs (Efra) committee on Tuesday that the first of these bonuses would be up to 50% of their salary, arguing senior management were its "most precious resource".

The bonuses are set to be the first to be blocked under Reed's water (special measures) bill, which gives the regulator, Ofwat, powers to ban financial rewards for executives working for a failing company.

Thames Water could be classed as such, as it is presiding over record sewage spills, heavily laden with debt and on the brink of financial collapse.