Thames Water stung with record fine by regulator

Thames Water has received a record-breaking Ofwat fine, for breaching rules over sewage spills and shareholder dividends. The move comes after Ofwat also appointed L.E.K. Consulting to function as an ‘independent monitor’ for the beleaguered company.

Thames Water is a British private utility company responsible for the water supply and waste water treatment in most of Greater London. The supplier serves about a quarter of the UK's population, mostly across London and parts of southern England, and employs 8,000 people.

Almost two years ago, the company’s finances were revealed to be in a dire state, despite making large payouts to its shareholders. While Thames Water managed to secure a £3 billion rescue loan earlier in 2025 to stave off collapse, it has taken a further knock, after receiving a huge fine from the UK’s water watchdog.

Ofwat is the body responsible for regulation of the water and sewerage industry in England and Wales. Created as the UK’s water system was privatised in the late Thatcher years, its chief statutory duties include protecting the interests of consumers, securing the long-term resilience of water supply and wastewater systems, and ensuring that companies carry out their functions and are able to finance them.

Following a probe into Thames Water, Ofwat levied a £122.7 million fine for breaching rules over sewage spills and shareholder payouts. The penalty is the biggest ever issued by the regulator Ofwat, which said the company had “let down its customers and failed to protect the environment”.

Ofwat found roughly three quarters of Thames Water’s storm overflows were spilling “routinely and not in exceptional circumstances” – something highly detrimental to the environment. At the same time, it pointed to dividends for shareholders – including an eye-watering £131.3 million payment made in March 2024, which was found to have broken official rules – as they were “undeserved” and did “not properly reflect the company’s delivery performance”.

As such, £18.2 million of the total fine related to shareholder payments. This constitutes the first time the regulator has fined a water company for this reason.

It comes after a significant period of pressure for Ofwat, too. While companies have discharged record levels of raw sewage into rivers and coastal waters since the pandemic – while raising bills, and increasing payouts to shareholders – Ofwat come under scrutiny for its lack of action. 

In September 2024, this saw questions raised when England and Wales’ independent monitor of the water industry appointed a management consultancy to serve as an independent monitor to Thames Water. The appointment of L.E.K. Consulting to effectively do Ofwat’s work for it prompted intense criticism – and soon after the appointment was announced, a disconnected release noted Environment Secretary Steve Reed had launched a "root and branch" probe to fix the UK’s polluted and “failing” water system, noting the review could consider “reforming or getting rid of Ofwat”.