About Consultation
This consultation invites views on our proposals to introduce a new rule on fitness and propriety, as part of new powers to set rules about remuneration and governance under section 35B of the Water Industry Act 1991.
The proposals build on a consultation we launched in October 2024 which set out our initial thinking on three remuneration and governance rules required under the legislation. This consultation only focuses on the rule on fitness and propriety, that will ensure individuals in Chief Executive, executive and non-executive board Director roles within water companies meet standards of fitness and propriety to carry out their responsibilities.
The first rule on performance-related executive pay came into force in June 2025. The statutory consultation on the second rule, covering consumer involvement in company decision-making, was launched on 14 August 2025. A consultation on broader company governance rules is expected later this year.
The proposed new Fitness and Propriety rule will require companies to have processes in place to assess the honesty and integrity, knowledge and experience, and financial soundness of both prospective and existing senior role holders and to report to Ofwat on their compliance. By strengthening accountability and governance, this rule, alongside the other remuneration and governance measures introduced under the Water (Special Measures) Act 2025, will help drive higher standards across the sector and support the rebuilding of public trust in water companies.
Subject to this consultation, the Fitness and Propriety Rule will apply from 1 April 2026 for new appointments to senior roles, and in relation to existing senior role holders it is proposed that water companies must apply the test and ensure appropriate action is taken by 1 April 2027. The rule will apply to the largest water and sewerage undertakers in England and Wales. We will also be working closely with new appointees (NAVs) during 2026 to seek to apply the fitness and propriety rule to them from 2027, taking a proportionate approach reflecting their size and scope.
Responding to our consultation
We are asking for responses to the consultation by 23 October 2025.
We are seeking views on the updated proposed rule and guidance and ask stakeholders to make us aware of any considerations or challenges with implementation that you consider may occur.
Please email responses to: [email protected]