The Environment Secretary has urged Southern Water’s chief executive to turn down a pay rise worth hundreds of thousands of pounds, saying it was not “merited”.
Lawrence Gosden, who has led Southern Water since 2022, was awarded £691,000 as part of a long-term incentive plan this year on top of his fixed pay of £687,000, according to the company’s annual report.
It is understood that he has only received half of this payment this year, taking his total pay to more than £1 million.
Asked on Sunday about Mr Gosden’s pay, Environment Secretary Steve Reed told the BBC’s Sunday With Laura Kuenssberg it was “outrageous” and implored Southern to “think about how this looks to their customers”.
He said: “Trust between the customers and the water companies is at the lowest point probably ever, and by paying their senior executives rises of that kind, what message are they sending to their customers?”
Asked whether Mr Gosden should turn down the pay rise, Mr Reed said: “I think it would be right if he did.”
He added: “I don’t think Southern Water has performed well enough for that kind of pay increase to be merited.”
Southern Water was banned from paying bonuses last month over a so-called “category 1” sewage spill in the New Forest, Hampshire, in August 2024.
Under new rules, companies are banned from paying bonuses if they do not meet environmental, consumer or financial standards, or are convicted of a criminal offence.
Southern Water has insisted the payment to Mr Gosden is not a bonus but part of a long-term incentive plan set up in 2023 and linked to a two-year effort to improve the company’s performance.
It is also paid directly by shareholders rather than out of consumers’ bills.
A Southern Water spokesperson said its chief executive’s pay and benefits were decided by a remuneration committee “following protocols and rules set out by Ofwat and in accordance with the law”.
They added: “Lawrence Gosden’s 2025 package includes a relocation allowance, and long-term incentive plan paid by shareholders which marks improvements made during the delivery of our turnaround plan. Both of these payments represent common industry practice.”
Mr Reed’s criticism of Mr Gosden’s pay package came before the publication of a landmark review of the water industry, which is expected to recommend sweeping reforms to how the sector is regulated, including the abolition of regulator Ofwat.
The review follows widespread criticism of water companies for awarding executives large bonuses and paying significant dividends to shareholders while missing targets for investing in infrastructure and overseeing a rise in sewage pollution in England’s rivers.
Earlier this month, Southern Water itself was forced to ask its owner, Australian investment firm Macquarie, for an extra £2.1 billion to help boost its struggling finances.
The company, which supplies 4.7 million people across the south and south-east of England, has amassed nearly £9 billion of debt – making it one of the most heavily indebted water firms in the UK behind Thames Water, previously also owned by Macquarie.
