Exclusive:Yorkshire Water CEO's £371K bonus would likely be blocked by future Ofwat ban amid £40m enforcement action

This is despite the company being one of the worst offenders when it comes to sewage overflows, and the Environment Agency giving Yorkshire Water a “red” rating due to rising pollution incidents.

Yesterday, Ofwat, the industry watchdog, said a probe into the company found “serious failures” over how it operated and maintained its sewage network, which caused excessive spills from storm overflows.

These spills have contributed to a situation in which no single river in Yorkshire is considered to be in good overall health, including Ilkley Beach, which has the highest level of untreated sewage anywhere in the UK.

Ofwat said Yorkshire Water has admitted to its failings and agreed to a £40m enforcement payout as a result.

It initially announced the company would have to pay £47m last summer, however this has been reduced due to recent improvements.

Instead Yorkshire Water will pay out £36.6m over the next five years to prioritise work on particularly problematic storm overflows in environmentally-sensitive areas.

The water firm, which supplies more than five million customers across the region, will also hand £3.4m of funding to the Great Yorkshire Rivers Partnership.

It comes as Yorkshire Water is set to hike its annual bill for customers by 29 per cent from April 1.

Ofwat said this would come from the company’s coffers and its shareholders, and could not be passed on to billpayers.

The Yorkshire Post also understands that this kind of enforcement action would likely preclude Ms Shaw from receiving another huge bonus.

The Government’s Water (Special Measures) Bill is currently awaiting Royal Assent, and will see Ofwat consult on rules which would block executives from receiving bonuses if standards are not upheld.

While the parameters for this have not been set yet, it is understood that enforcement action, like Yorkshire Water’s £40m pay out, would see performance-related pay being limited.

Ms Shaw recently defended her £371,000 bonus to MPs on the Environment, Farming and Rural Affairs Select Committee, saying the company’s remuneration committee set “really stretching targets”.

“In particular, we improved and continue to improve on leakage and in relation to our staff engagement and staff safety and they wanted to reflect that in what had been a difficult year,” she claimed.

“They also recognised that we did nowhere nearly well enough in relation to our outcomes in relation to the environment and removed any bonus in relation to the environment.”

Responding to the £40m enforcement action, Ms Shaw added: “We know our storm overflows operate more frequently than we, or our customers, would like them to.

“Since 2021, we’ve been actively taking steps to improve our performance. We know there’s still more for us to do.

“We’re at the forefront of the industry to get this resolved and we’re looking forward to delivering our ambitious plans to improve river health in Yorkshire.

“We apologise for our past mistakes and hope this redress package goes some way to show our commitment to improving the environment.”

It comes as the environmental watchdog has launched an investigation into whether the Government has failed to comply with key laws on water quality.

The Office for Environmental Protection (OEP) launched the investigation into the Environment Department (Defra) and Environment Agency, following a report last year which found most rivers, lakes and coasts were likely to remain in a poor state in the years ahead.

It is the latest move by the watchdog to address England’s poor water quality, amid widespread public anger over the state of the country’s rivers, lakes and coastal waters.

The report in May 2024 found the Government and Environment Agency were off-track to meet targets for 77 per cent of England’s water bodies to reach good condition by 2027.

In a worst-case assessment, just 21 per cent of England’s surface waters would be in a good ecological state, which measures the health of aquatic plants, fish and insects, by 2027, up only marginally from the 16 per cent in good condition today, it said.

Defra has broadly accepted the findings of the report, but the OEP said the response from Government did not provide “direct assurances” the issues identified would be addressed in a timely manner.

The follow-up investigation will look at whether the issues raised in the report represent a failure to comply with environmental law, the watchdog said.

A Defra spokesperson said the Government was “determined” to clean up polluted rivers, lakes and seas, pointing to moves including new powers to ban bonuses for polluting water bosses, and bringing criminal charges against lawbreakers.

“We have also launched an Independent Water Commission, which is looking at widespread water sector reform, including the effectiveness of the water framework directive.

“We welcome the OEP’s support for the commission and share their commitment to improve water quality. We will work constructively with them on this investigation.”