Yorkshire Water chief executive Nicola Shaw has acknowledged that failing to disclose £1.3m in payments from the company’s parent firm was an error, as scrutiny intensifies over executive pay in the water industry.
Ms Shaw received two previously undisclosed payments of £660,000 from Kelda Holdings during the 2023–24 and 2024–25 financial years for her work as an executive director. These shareholder-funded payments were in addition to her Yorkshire Water salary, which totalled £1.7m over the same period.
She said the lack of transparency was wrong but stressed that decisions over her pay were made by the board, not by her personally. She added that executive remuneration levels were determined by what boards believed was appropriate for running large organisations.
The payments became public in August, one month after Yorkshire Water and five other water firms were banned from paying unfair bonuses to senior executives. The ban was introduced amid growing public anger over pollution, rising bills and company performance.
Ms Shaw said she understood why the additional payments from Kelda could be viewed negatively by customers, but argued that the parent company chose to fund them so that Yorkshire Water customers would not bear the cost of higher executive pay.
She confirmed that any future payments from Kelda would be fully disclosed in Yorkshire Water’s accounts.
In September, the government asked regulator Ofwat to carry out an urgent review of the payments. Environment Secretary Steve Reed told Parliament that customers were outraged and said the government would not tolerate attempts to bypass the ban on unfair bonuses.
In November, Ofwat concluded that the payments did not breach its bonus restrictions because they were classified as parent group payments rather than direct performance bonuses. However, the regulator said it was considering new rules to force water companies to report income received from parent firms.
Ms Shaw had previously declined a bonus in 2023, saying it would be inappropriate given Yorkshire Water’s environmental performance. An Ofwat investigation found the company discharged untreated wastewater into rivers for an average of seven hours a day in 2023, with nearly half of its storm overflows breaching regulations.
Yorkshire Water was later ordered to pay £40m to address what were described as serious failures.
Despite this, in December 2024 Ms Shaw accepted a £371,000 bonus as the company announced plans to raise water bills by 41%. She said the bonus was funded by shareholders and that the bill increases would be used to improve water supplies, cut sewage discharges and reduce storm overflows.
Between January and early September this year, reservoir levels across Yorkshire fell by almost two thirds, leading to the region’s second hosepipe ban in three years. The shortages raised concerns about long-term water storage, particularly after several of the wettest autumns on record since 2020.
Ms Shaw said the company was reviewing whether a new reservoir was needed but warned that such projects would not solve short-term supply issues. She said reservoirs required extensive planning, were extremely costly and could take many years to deliver, pointing to Anglian Water’s two planned reservoirs with an estimated cost exceeding £4bn.
The last reservoir built in Yorkshire was Grimwith in 1983. Since then, the population served by Yorkshire Water has grown by around 750,000.
She said improvements in water transportation, the expansion of boreholes and potential alternative storage solutions, including former coal mines, had strengthened the company’s resilience. She added that Yorkshire Water was working closely with local authorities to ensure reliable water and wastewater services.
Earlier this year, Yorkshire Water said the payments made by Kelda reflected the importance of Ms Shaw’s role in securing long-term investment, including investor engagement, financial oversight and management responsibilities.
Campaigners remain critical. Cat Hobbs, director of public ownership group We Own It, described Ms Shaw’s pay as excessive and said the Kelda payments highlighted deeper problems within the privatised water sector.
She argued that water companies should prioritise households and the environment rather than shareholders and highly paid executives.
