The chief executive of Southern Water has received a £183,000 bonus despite submitting a business plan that has been criticised by the industry regulator and attempting to raise bills more than any other English water company.
Lawrence Gosden received the bonus as part of a £764,000 pay package, up from £428,000 a year earlier, according to the company’s annual report.
Southern Water, which serves 2.5 million customers across south-east England, had proposed to raise water bills by 73% to £727 under its five-year business plan to 2030.
Last week, the regulator, Ofwat, said the plan “fell short” of minimum expectations and categorised it as “inadequate”. However, it still provisionally allowed a bill increase from £420 to £603, the biggest rise in the country as the company tries to raise funds to fix leaky infrastructure. Including inflation, the increase is even higher – from £451 to £722.
Gosden was appointed during the pandemic, in May 2020, to turn around struggling Southern, replacing Ian McAulay who had told MPs he would swim in the rivers and sea amid criticism over sewage dumping. Gosden has worked in the water industry for more than three decades.
The report showed the finance chief, Stuart Ledger, received £610,000 – including a £128,000 bonus – up from the £170,000 package he received the previous year, when he joined shortly before the end of the financial year.
Ofwat is belatedly attempting to crack down on bonuses paid out in the water industry, as suppliers face anger from the public and MPs over the release of raw sewage into waterways, company debt levels, the dividends paid out, and executive pay.
The chief executive of struggling Thames Water, Chris Weston, this month defended his bonus of £195,000 for his first three months in charge.
In response to Gosden’s bonus, first reported by the Financial Times, the former Undertones singer turned water campaigner Feargal Sharkey posted on X: “See this is how it works. Publish an ‘inadequate’ business plan, persuade the regulator to allow you to increase customers’ bills by 60% over the next 5 years and you get a £764,000 salary including a £183,000 bonus. ‘Trebles all round.’”
Southern Water said Gosden and Ledger had hit targets for improving water quality, reducing pollution and cutting customer complaints. However, they missed goals for leakage, sewer flooding, customer experience and cash management.
“This bonus will not be paid for from customers’ bills and will be borne by shareholders,” the company said.
Southern, which supplies water to customers across a large stretch of south-east England from Hampshire to Kent, as well as the Isle of Wight, said Gosden and Ledger declined to take a bonus for the year before.
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Southern remains subject to enforcement monitoring after a record £126m fine in 2019. On Tuesday, Ofwat broadened its investigation into wastewater management across the industry.
In 2021, Southern received a £1bn cash injection to save it from possible renationalisation. It is majority owned by the Australian investor Macquarie, which has been criticised for its stewardship of Thames Water.
Last weekend, a £1.2bn scheme for Southern to recycle effluent from the sewage system in Hampshire and turn it into drinking water was called costly and a threat to the environment.
A spokesperson for Southern Water said: “Having declined a bonus last year, Southern Water’s chief executive and chief financial officer will receive a partial bonus in 2024, paid by shareholders rather than from customer’s bills, after the board’s remuneration committee acknowledged progress made in delivering on the company’s ambitious turnaround plan.
“Despite the region’s wettest year on record, the committee highlighted significant advances in treated water quality, a reduction in overall pollution numbers, and falling customer complaints, but also recognised areas where further progress is needed.”
