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Britain’s largest water company, which intends to raise bills by at least a third for the 16m customers it serves in and around London, has warned the water regulator of its plans to raise base pay, according to a report by the company’s regulatory strategy committee to the board of Thames, the Financial Times reported.
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The report dated 3 December, by Jon Haskins, chief risk and compliance officer at Thames, said, according to the paper:
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We have made it very clear to Ofwat that, if it proceeds with its proposals, it is highly likely that base pay will need to be increased to compensate for the loss of performance-related pay plans.
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We also highlight the impact the proposals will have on attracting, retaining and motivating critically needed talent across the sector, and the importance of this for attracting investment.
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The plan to clamp down executive pay at badly performing water companies is part of the government’s water (special measures) bill, which is making its way through parliament and is expected to be ratified this year.
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In November, the regulator determined that the sector had awarded “undeserved” extra payments, worth £6.8m, forcing investors at Thames, Yorkshire Water and Dŵr Cymru Welsh Water to pick up the tab for executive bonuses.
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Ofwat said it had used new powers to ensure that bonuses at the three companies were paid by shareholders and bondholders – rather than through customer bills – because the payments had not “adequately reflected overall company performance issues”.
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Water companies have faced public anger and political backlash in recent years over leaks and sewage overflows as they have also come under increasing financial strain.
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Nine water companies will not be allowed to use customer funds to pay bonuses worth £6.8m. Six voluntarily said that shareholders would pay, but Ofwat had to use its powers directly in the cases of bonuses worth £1.5m from Thames, Yorkshire and Welsh.
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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
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It’s inflation day! We’ll be getting inflation figures for the UK first thing, followed by US data later in the day.
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UK inflation is expected to have stayed at an annual rate of 2.6% in December, while the core rate, which strips out volatile energy and food costs, is forecast to have edged lower.
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The figures will be released by the Office for National Statistics at 7am GMT. The Bank of England’s target is to keep inflation at 2% over “the medium term,” i.e. the next two years.
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Core inflation is expected to have dipped to 3.4% from 3.5% in November, still uncomfortably high for the central bank.
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Michael Field, European equity strategist at Morningstar, said:
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UK inflation is expected to remain steady at 2.6% for December. While the word steady usually sounds like a good thing, investors and central bankers will be relatively unhappy with the current level, which sits significantly above the Bank of England’s 2% targeted level. We believe it’s too early to be talking about the prospect of Stagflation, but it’s certainly something already concerning many investors.
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The one positive in the mix is that core inflation, which strips out volatile components such as food and energy, is expected to decline slightly to 3.4%. But once again, this number sits far above the targeted level for inflation.
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Some investors have been vocally critical about the seemingly slow pace at which the Bank of England is cutting rates. Ultimately, we do not believe that inflation will ramp up any further, but getting inflation consistently closer to the key 2% level might be difficult from here. So perhaps we should already be adjusting our expectations for interest rate cuts in 2025.
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Markets are on tenterhooks ahead of the US inflation figures for December. They are expected to show an increase to 2.9% in the annual rate in December, from 2.7% in November.
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Traders have already scaled back their bets on US interest rate cuts, and are only expecting one quarter-point reduction by December.
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The Agenda
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9am GMT: International Energy Agency releases monthly oil report
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9am GMT: Germany 2024 GDP
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1.30pm GMT: US inflation for December (previous: 2.7%; forecast: 2.9%)
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main events
Thames Water plans executive pay hikes to avoid bonus cap – FT
Thames Water is reportedly threatening to increase the basic pay of its executives if the UK government goes ahead with plans to cap bonuses.
Britain's biggest water company intends to increase bills by at least a third for the 16 million customers it serves in and around London, with plans to increase basic pay, according to a report from the company's regulatory strategy committee. The company has reportedly warned water regulators about the issue. thames board, The Financial Times reported.
According to the report dated December 3, John HaskinsAccording to the paper, Thames River's chief risk and compliance officer said:
We have clearly communicated to Ofwat that if we proceed with our proposals, basic pay increases are likely to be required to compensate for the loss of performance-related pay plans.
We also highlight the impact this proposal will have on attracting, retaining and motivating vital talent across the sector and the importance of this in attracting investment.
The plan to crack down on executive remuneration at underperforming water companies is part of the government's Water (Special Measures) Bill, which is currently being passed by parliament and is expected to be ratified this year.
In November, the regulator found the industry had made “unwarranted” additional payments worth £6.8m, forcing investors to invest in the Thames. yorkshire water and Dol Cymru Wales Water Select the Executive Bonus tab.
off watt The company said it used new powers to ensure that the three companies' bonuses were paid by shareholders and bondholders rather than customer claims because the payments “did not adequately reflect company-wide performance issues.” Ta.
Water companies have faced public anger and political backlash over leaks and sewage overflows in recent years, and their financial burdens have increased.
Nine water companies will not be allowed to use customer funds to pay out bonuses worth £6.8 million. Six companies said their shareholders would pay voluntarily, but Ofwat had to use its powers directly over £1.5 million worth of bonuses from Thames, Yorkshire and Wales.
Ellie HendersonInvestec UK economists expect UK inflation to rise to 2.7%.
As with the November increase, there is no one specific factor behind this increase. Rather, our forecasts reflect a confluence of various upside influences, including base effects. One of the unknowns is the extent to which businesses are already preparing for the rise in labor costs in April, which itself reflects the rise in NICs. [national insurance contributions] And change the national living wage by starting to raise prices. Due to the highly volatile nature of airfares, they can also cause fluctuations in headline inflation. We expect this factor to push inflation slightly higher in December.
From there, we project inflation to remain above our 2% target throughout 2025, but the core measure for further progress will be lowered from spring onwards. This divergence can be mainly explained by energy prices, whose failure to fall sharply during 2024 pushed up inflation in 2025. Some inflationary effects from the budget are also likely to impact overall cost pressures. What remains unknown at this point is what form President Trump's trade policy will take and, importantly, how other countries, including the UK, will react to the significant changes.
Introduction: UK inflation forecast to beat target again in December
good morning. Welcome to our regular coverage of business, financial markets and the global economy.
Today is Inflation Day! We'll get the UK inflation figures first, followed by US data later in the day.
British inflation is expected to remain at an annual rate of 2.6% in December, while core interest rates, which exclude volatile energy and food costs, are expected to fall slightly.
The figures will be released by the Office for National Statistics at 7am GMT. The Bank of England's aim is to keep inflation at 2% over the “medium term”, or the next two years.
Core inflation is expected to fall to 3.4% from 3.5% in November, a level that remains uncomfortable for the central bank.
michael fieldsaid Morningstar European Equity Strategist.
Inflation in the UK is expected to remain stable at 2.6% in December. While stability usually sounds like a good thing, investors and central bankers will be relatively dissatisfied with current levels, which are well above the Bank of England's target level of 2%. Although we believe it is too early to talk about the prospect of stagflation, it is certainly already a concern for many investors.
The positive in this is that core inflation, which excludes volatile factors such as food and energy, is expected to decline slightly to 3.4%. But again, this number is well above the target level of inflation.
Some investors have been vocal in criticizing the Bank of England's seemingly slow pace of rate cuts. Ultimately, we don't expect inflation to rise any further, but it may be difficult to consistently keep inflation close to the important 2% level going forward. So we probably already need to adjust our rate cut expectations for 2025.
Markets are nervous ahead of December's US inflation data. The annual rate is expected to rise to 2.9% in December from 2.7% in November.
Traders have already scaled back bets on a U.S. interest rate cut, expecting only a one-quarter point cut by December.
agenda
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9am GMT: International Energy Agency releases monthly oil report
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9am (GMT): Germany's GDP in 2024
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1:30pm GMT: US December inflation rate (previous: 2.7%, forecast: 2.9%)
