Southern Water has nearly doubled its chief executive’s annual pay package to £1.4m despite financial difficulties and a government ban on it awarding bonuses.
Lawrence Gosden was awarded £691,000 under a “two-year long-term incentive plan” (LTIP), on top of fixed pay of £687,000 in its last financial year, according to the company’s annual report published this week.
In the previous financial year he was awarded total pay of £764,000 including a bonus of £184,000.
Water companies have been under intense scrutiny in recent years amid outrage over sewage leaks into Britain’s rivers and seas. The Labour government sought to address some of that anger through a ban on bonuses for top executives at water companies that break the law.
Southern Water was last month banned from paying bonuses with immediate effect after a sewage leak in August 2024 in the New Forest in Hampshire that fell into the most serious category. Southern said the extra LTIP pay was linked to a turnaround plan and was not a bonus, and that it complied with the law and with rules set by Ofwat, the water regulator.
Feargal Sharkey, the former lead singer of the Undertones turned water campaigner, said he and others had warned the government that the bonus ban would not cut overall pay for “fat-cat executives”.
“It is a blatant attempt to get around the bonus ban. This happened before when they banned bonuses for bankers. The issue of fat-cat pay levels has reared its head and bitten the government on the arse once again,” he said.
The increase to Gosden’s pay package is likely to be controversial as it emerged weeks after Southern Water was forced to ask shareholders, led by Macquarie, for £1.2bn to avoid a breach of its regulatory licence because of unsustainable debts. Macquarie is the former owner of Thames Water, whose debt pile has led it to the verge of collapse into temporary nationalisation.
Southern Water, which supplies Kent, Sussex, Hampshire and the Isle of Wight with water and sewage services, this week announced a hosepipe ban that was criticised for coming at a time when bills have risen significantly. Some experts say such bans are necessary to preserve water amid drought conditions in some parts of the country.
Southern had already been allowed a 53% bill increase for its 4.7 million customers to an annual average of £642 – the largest rise of any company in England and Wales – but it is appealing to the Competition and Markets Authority to charge more.
Gary Carter, a national officer at the GMB union, which represents thousands of water industry workers, said: “For Southern Water’s boss to trouser more than a million pounds after just announcing a hosepipe ban and losing millions of litres in leaks every single day is abhorrent.
“It encapsulates everything that’s wrong with our broken, privatised water system.”
A Southern spokesperson said the company had a record year for leak repairs. They said: “Our CEO received no bonus this year, in line with the new Ofwat rule. He was paid part of a long-term incentive scheme linked to our turnaround that dates from early 2023. That’s funded not by customers, but by our shareholders. We made record investments of £977m last year, which helped to deliver a successful turnaround plan including reducing leaks by more than 15%.”
Gosden would have received another £396,000 if not for the ban on annual bonuses. The company’s chief financial officer, Stuart Ledger, had been in line for a bonus of £335,000 on top of pay worth £987,000.
Southern’s remuneration committee decided to award Gosden £691,000 under the LTIP on 24 June, under a plan set up in 2023.
The two-year plan is not caught by the rules on annual bonuses, although most companies do not generally consider a two-year period as “long term”. It is understood that half the amount will be paid this year. A person with knowledge of the regulations said schemes that started before 1 April 2024 were not covered by the ban.
Gosden’s pay increase was also driven by “benefits” worth £111,000, nearly quadruple the value of the benefits received the previous year. Those benefits included a relocation allowance, private healthcare and a car allowance.
Southern’s spokesperson added that the relocation allowance and the long-term incentive plan “represent common industry practice”.
