Water companies will now have to assess whether appointees to board director roles, including CEOs, meet new standards for honesty and integrity, knowledge and experience, and financial soundness to carry out their responsibilities.
This new rule on fitness and propriety follows the powers granted to Ofwat under the Water (Special Measures) Act 2025 to strengthen water company leadership and culture, and rebuild public trust in the sector.
Helen Campbell, Executive Director, Delivery at Ofwat said:
"The water sector as a whole must earn back the public’s trust, and this new rule will ensure that water companies maintain high levels of integrity and financial responsibility in their leadership. This will encourage a positive organisational culture that better protects the interests of customers and the environment."
From 1 April 2026, water companies must comply with the new rule and ensure that they have:
- Established procedures to assess the fitness and propriety of applicants and current senior role holders.
- Started to evaluate candidates for new appointments using the fit and proper person test covering honesty and integrity, knowledge and experience, and financial soundness, and undertake that assessment on existing staff in preparation for 1 April 2027.
- Report assessment processes and results to Ofwat, including annual compliance and reassessment if circumstances change.
The rule will apply initially to the 16 largest water companies in England and Wales. Companies are required to comply with the rule from 1 April 2026 in respect of new board appointments and are required during 2026/27 to apply this rule to existing persons in board director roles to ensure their compliance with it from 1 April 2027. Ofwat will be engaging with new appointee companies (NAVs) during 2026 to establish application of the rule to them in 2027.
Ofwat will closely monitor companies' compliance with the rule and keep the application and implementation of it under review on an ongoing basis.
Water Minister Emma Hardy said:
“This government is delivering a new era of accountability in the water sector, with new fitness and propriety tests for water bosses. These rules will come into force in a matter of months and ensure senior leaders meet the highest standards as we rebuild public trust, strengthen accountability, and drive change to clean up our rivers, lakes, and seas. This is just the start. Our Water White Paper will set out a pathway of long-term reform that includes stronger and more integrated regulation to better protect public health and the environment, while driving infrastructure delivery.”
As well as the new standards for board directors, Ofwat has acquired powers under the Water (Special Measures) Act 2025 to ban bonuses for underperforming water company bosses and to require companies to involve their customers in decision-making.
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