Thames Water gets £123million 'biggest ever' fine for dividend and sewage failures

Thames Water has been handed an almost £123million fine – the biggest ever issued by the water industry regulator Ofwat – for sewage failures and shareholder payouts.

Ofwat’s ‘biggest and most complex investigation’ found Thames Water had failed to maintain and operate its sewage network to prevent unnecessary spills into rivers and streams.

It also found the company at fault over multi-million pound ‘undeserved’ payments made to shareholders when ‘performance did not merit it’.

Ofwat chief executive David Black said: “This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment.”

The regulator has said fines would be paid by the company and not by its customers.

Thames Water's headquarters in Reading.

A Thames Water spokesperson said the company takes the environment ‘very seriously’ and that shareholder payments had considered its ‘legal and regulatory obligations’.

Thames Water is Britain’s largest water company and provides fresh and wastewater services to households across Berkshire and Buckinghamshire.

A £104.5million fine was proposed by Ofwat last year over historic sewage spills which saw its treatment works in Little Marlow and Slough among the worst offenders.

Water companies are permitted to release untreated sewage into rivers through Combined Sewer Overflows (CSOs), as a last measure when flooding of a treatment plant is a major risk.

But Ofwat’s investigation uncovered sweeping failures to build, maintain and operate its infrastructure to prevent spills.

The £122.7million fine announced today (May 28) includes the 2024 figure and added an additional £18.2million for problem payments company shareholders.

Ofwat’s decision to fine Thames Water over shareholder payments is the first time it has done so.

Thames Water has paid out nearly £180million in dividends in the last two years: dishing out payments of £131.3millon in 2024 and £37.5million in 2023.

Ofwat’s investigation found Thames Water had breached licensing conditions that mean dividend payments must consider a company’s customer and environmental performance.

Mr Black said: “We will not stand by when companies pay undeserved dividends to their shareholders.”

He added: “We will protect customers from water companies that seek to take money out of their businesses, where their performance does not merit it.”

Pollution spills from Thames Water's Little Marlow sewage works have drawn criticism (Archive image). 

Environment Secretary Steve Reed said: “The era of profiting from failure is over.

“The Government is cleaning up our rivers, lakes and seas for good.”

Thames Water has been placed in ‘cash lock-up’ and is unable to pay further dividends or bonuses without approval from the regulator.

The troubled company, saddled with billions in debt, is seeking new investment after being thrown a lifeline £3billion emergency loan to avoid bankruptcy in February.

A Thames Water spokesperson said: "We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.

​“The dividends were declared following a consideration of the company's legal and regulatory obligations.

​“Our lenders continue to support our liquidity position and our equity raise process continues.”