The Water (Special Measures) Act 2025 has received royal assent, representing a landmark moment in government attempts to clean up the water industry in England and Wales.
One of the key pledges in the Labour manifesto was to deliver marked improvements to a sector in which public trust is at an all-time low.
Persistent pollution, sewage spills into rivers and seas and underinvestment in infrastructure whilst executives received lavish payouts despite poor performance have spurred demand for reform.
The Water Act 2025 represents the government’s first steps in attempting to improve the sector. It was introduced to Parliament in September 2024 and has passed through both Houses reasonably easily, demonstrating cross-party acceptance that something needs to be done about the current start of the water industry.
Here are some of the core provisions of the Water Act 2025 and the impact it will have on the sector.
Criminal accountability for executives
The Act empowers the Environment Agency to pursue criminal charges against water company executives who obstruct pollution investigations or fail to prevent sewage spills. If found guilty, punishments are expected to include fines and up to two years imprisonment.
Before the Act, individuals knew they were unlikely to be held personally responsible no matter how bad their company’s environmental performance. There was little incentive to improve.
With the threat of fines or jail sentences, executives are now accountable. The theory being this will lead to improvements in areas such as storm overflows and wastewater treatment plant pipe repair, reducing pollution incidents.
Ban on executive bonuses
The water regulator Ofwat will be granted the power to prohibit performance-related bonuses for senior executives at companies who fail to uphold environmental, financial or consumer standards.
In October, The Guardian reported £9.1 million was paid out in bonuses during 2023-24 to executives. £3.36 million of that total came from Severn Trent covering the same period the company was fined £2 million for reckless pollution.
Thames Water meanwhile increased its payouts to executives to £1.3m in 2023-24, despite its CEO quitting halfway through the year and the company saying in summer 2024 it did not have enough cash to last the next 12 months.
When you read about instances like these, it is easy to understand public anger. Shareholder payouts at the same time as bills rise and pollution increases is an issue the water industry appears tone-deaf towards.
Ofwat now has the power to curb these excesses. How strictly it uses it remains to be seen.
Real-time monitoring of sewage outlets and Pollution Incident Reduction Plans
The Water Act 2025 features a number of provisions it is hoped will improve the state of rivers in England after huge increases since 2016 in the amount of sewage discharged into nature.
Every emergency sewage overflow must now have real-time monitoring of how much untreated wastewater is being released.
This data must be published within one hour for independent scrutiny, providing a significant transparency boost and a much clearer picture over how widespread storm overflow practice is.
A further measure regarding the environment means water companies must now explicitly address how they incorporate nature-based solutions into their drainage and wastewater management plans.
Each firm will have to justify their choices, as well as outlining the cost and environmental benefits to their approach.
Water companies will also be required to annually produce and publish Pollution Incident Reduction Plans (PIRPs) from June 2025. PIRPs will detail how each provider intends to reduce sewage leaks, invest in infrastructure and engage with customers.
The first reports must be published before April 1st 2026 with the aim of reducing sewage spills by 45 percent by 2030.
Automatic penalties and regulatory cost recovery
From a monetary perspective, the Water Act 2025 allows regulators to impose fines more quickly and decisively than is currently possible.
The requirement for lengthy investigations will be removed, whilst also enabling automatic and severe penalties for non-compliance.
A new levy will be introduced for the Environment Agency to recover the costs of enforcement from water companies directly.
This will replace the current model whereby enforcement is paid for via government funding, freeing up money for investment in other areas.
The Water Act 2025 – and beyond
The Water Act 2025 represents a significant overhaul of water governance in England. By introducing criminal accountability, transparency mandates and linking executive pay to environmental performance, the Act seeks to restore trust and drive tangible improvements in waste management.
Looking forward, the Act is one part of a broader agenda for reform of the industry. The Independent Water Commission Report by Sir Jon Cunliffe is due for release in July.
It is expected to recommend systemic restructuring, including a national water strategy and potentially a new regulator to replace Ofwat – further seismic changes to work in tandem with the Act.
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