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• The company and its shareholders will pay a £104.5m penalty for breaches of rules relating to its wastewater operations. This is the largest penalty Ofwat has ever issued.

• They will also pay an additional penalty of £18.2m for breaches of rules relating to dividend payments. 

• An enforcement order has been issued by Ofwat requiring Thames Water to rectify identified breaches relating to its wastewater operations. 

Ofwat has announced the final decision in two investigations looking into the operations of Thames Water, who will face penalties totalling £122.7m. These will be paid by the company and its investors, and not by customers.  

In its biggest and most complex investigation, Ofwat has been looking into all wastewater companies’ operation, management and maintenance of their sewage treatment works and sewerage networks. As part of that investigation, in August 2024, Ofwat consulted on a proposal to impose a £104.5m penalty on Thames Water, alongside an enforcement order which would require the company to take steps to ensure its compliance. Today, Ofwat has finalised both the penalty and enforcement order which have been imposed on the company. 

Ofwat’s investigation into how the company was managing its treatment works and wider wastewater network uncovered failings that have amounted to a significant breach of the company’s legal obligations, which has caused an unacceptable impact on the environment and customers. 

David Black, Chief Executive at Ofwat, said:

“This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment. Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations. The company also failed to come up with an acceptable redress package that would have benefited the environment, so we have imposed a significant financial penalty.  

“This decision provides certainty for the company for both its past failures and what we expect from the company to comply with its obligations in future. The company is seeking new buyers to fund its turnaround to provide better services for customers and the environment by improving operational performance and financial resilience. This provides a clear opportunity to break with the past, Thames Water will now need to correct the issues our investigation has identified.”

Environment Secretary, Steve Reed said:   

“The Government has launched the toughest crackdown on water companies in history.

“Last week we announced a record 81 criminal investigations have been launched into water companies. Today Ofwat announce the largest fine ever handed to a water company in history.

“The era of profiting from failure is over. The Government is cleaning up our rivers, lakes and seas for good.”

Ofwat has also confirmed its decision to impose a £18.2m penalty on Thames Water as a result of a separate investigation which found that the company had broken the rules relating to the payment of dividends. This is the first time Ofwat has used its powers to take enforcement action against a water company where their decision to make dividend payments does not properlyreflect the company’s delivery performance for customers and the environment.  

Mr Black said:

“We are clear that dividends must be linked to performance for customers and the environment. We will not stand by when companies pay undeserved dividends to their shareholders. This is the first time we have used these new powers, and this sets thestandard. We will protect customers from water companies that seek to take money out of their businesses, where their performance does not merit it.” 

This investigation considered several payments made by the company. Ofwat concluded that, interim dividend payments totalling £37.5m, made in October 2023 to its holding company, Thames Water Utilities Holdings Limited, and further dividend payments amounting to £131.3m, made in March 2024 broke the rules. Whilst no cash left Thames Water as a result of the March 2024 payment, there was an extraction of value which Ofwat will be able to recover. In addition to the penalty, through an adjustment to future price control, ensuring customers do not lose out. The company is now in cash lock up and no further dividend payments can be paid by the company without first obtaining approval from Ofwat. 

Notes for editors  

• You can find a link to the relevant enforcement cases here:
  • Wastewater investigation: https://www.ofwat.gov.uk/consultation/notice-of-ofwats-proposal-to-issue-an-enforcement-order-and-impose-a-financial-penalty-on-thames-water/#Outcome 
  • Dividends investigation: https://www.ofwat.gov.uk/consultation/notice-of-ofwats-proposal-to-impose-a-financial-penalty-on-thames-water-as-a-result-of-its-contravention-of-condition-p30-of-its-licence/#Outcome
• Ofwat can impose financial penalties of up to 10% of a company’s relevant turnover. In deciding whether to impose a penalty and the level of that penalty, Ofwat will take account of the particular facts and circumstances of the case under consideration to establish the appropriate level of penalty to impose. 
• The £104.5m penalty applied in this case equates to 9% of Thames Water’s relevant turnover.
• Ofwat’s investigation into how the company was managing its treatment works and wider wastewater network uncovered a number of failings that have amounted to a significant breach of the company’s legal obligations, which has caused an unacceptable impact on the environment and customers. It found that:
  • 157 wastewater treatment works (WWTW) – 66% of its WWTW with flow to full treatment (FFT) permit conditions were unable to meet those conditions due to capacity or operational problems – what Thames Water calls its “sites of concern”.
  • 171 storm overflows (73%) associated with Thames’s WWTW recorded 20 or more spills in 2021. This indicates that almost three quarters of overflows were spilling routinely (and not in exceptional circumstances) and so are likely in breach of regulations.
  • 69 wider network storm overflows (30%) spilled 20 or more times and 14 (6.1%) spilled more than 60 times in 2021. However, this is unlikely to be an accurate reflection of Thames’s actual spills performance, as in 2022 it identified 307 network storm overflows which had not previously been listed and were unmonitored. The true scale of Thames’ network spills is therefore likely to be much higher than reported.
  • 196 of the 307 newly listed SOs were also unpermitted. This also constitutes a breach.
• In addition to the penalty applied relating to dividend payments, Ofwat will also claw back the value from £131.3m of dividend payments using the price control so customers do not lose out on tax benefits.
• Thames Water’s credit rating is currently below investment grade; it is now in cash lock up and no further dividend payments can be paid by the company without first obtaining approval from Ofwat. This arrangement will continue until Thames Water’s credit ratings improve and meet the requirements in their licence.