Regulators flex new powers as Thames Water hit with record £122.7m fine
Ofwat has issued its largest ever penalty after uncovering serious failings in Thames Water’s wastewater operations and dividend practices. The regulator’s unprecedented £122.7 million fine marks the first time it has exercised new enforcement powers – a move Partner Natalie Knight-Wickens says, “will have sent shivers down the spines of business owners, execs, advisers, and shareholders across the board.”
Thames Water and its investors are set to pay £104.5 million for breaches related to environmental performance, with a further £18.2 million penalty linked to dividend payments made despite those failings. Ofwat found that interim dividends totalling £37.5 million and further payments of £131.3 million were not aligned with the company’s performance, triggering enforcement under new rules.
In the full article by Benefits Expert, Knight-Wickens explains that this case represents a stark warning.
“The use of the new powers offered to Ofwat and other regulators show that they are indeed not scared to use them where necessary. Understanding the meanings of ‘justified’ and ‘unjustified’ dividend payments should be at the top of everyone’s mind.”
“A justified dividend is rooted in performance, distributable profits, and responsibility, while an unjustified one is when payouts are made despite poor service and financial manipulation. In Thames Water’s case, the regulator highlighted a mismatch: dividends paid despite environmental violations, financial engineering of the numbers and a lack of service improvements.”
Her final remarks strike at the heart of governance and business culture.
“Be careful what your business rewards. Culture is shaped by incentives. And right now, companies must take a hard look at whether their success is being built on solid ground.
You can’t fake performance and expect no one to notice. Capitalising costs, inflating reserves, and spinning the numbers might keep investors happy in the short term – but regulators are watching. And so are your customers.”
The case has wider implications for boardroom decision-making, investor relations and risk management. As Ofwat Chief Executive David Black put it: “This action sets the standard.”
Read the full article on Benefits Expert here: ‘Be careful what you reward’, lawyer warns after record Thames Water fine
