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 are in line for "substantial" bonuses linked to an emergency £3bn loan.
Thames claimed the payouts were vital to retain staff and prevent rival companies from "picking off" its best employees. But the disclosure provoked fury as the company has said its finances are "hair raising" and that it had come "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 "the days of profiting from failure are over".
It emerged this week that Thames was planning to use part of a £3bn emergency loan, which was meant to stabilise its 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 managers are its "most precious resource".
The bonuses could 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 presiding over 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.
Reed said: "Water companies got away with dumping a tidal wave of sewage into our river while pocketing millions pounds of bonuses.
"That ends now. The government will ban the payment of unfair bonuses for polluting water bosses. The days of profiting from failure are over."
Chris Weston, Thames's chief executive, was paid a bonus of £195,000 for three months of work after he joined the company in January 2024, giving him a total package of £2.3m. However, this bonus is unlikely to be affected by Reed's clampdown.
Weston defended his pay to MPs, claiming: "I joined Thames because it matters to society. Within the first three months I did make a difference."
Weston's bonus could amount to as much as 156% of his pay, compared with 3% to 6% for frontline workers, he said.