The water sector regulator, Ofwat, has fined Thames Water the maximum automatic penalty it can of £8.55m for admitting in this year's report and accounts that it will miss its leakage reduction targets for the first time 11 years. Ofwat said the penalty is borne by the company alone and cannot be passed on to customers.

The water company's leakage target forms part of the regulatory performance commitment regime. The company said it had set itself challenging targets for the current five-year regulatory period. But having cut its leakage rate by a third between 2004 and 2015/16 the leakage rate had then risen by 5% since last year. This was partly due to a cluster of its Victorian pipes bursting and the company commissioned an independent review of these incidents.

Cathryn Ross, Ofwat chief executive, said: "The failure by Thames Water to meet the leakage commitments it has made to its customers is unacceptable. Our performance commitment regime imposes significant penalties for failure to deliver the levels of performance that customers have paid for and consequently, Thames Water will now face the maximum penalty. We take very seriously our responsibility to ensure that every water company is delivering for its customers and where they fall short, we do not hesitate to step in to protect customers’ interests."

In March this year, the company was forced to pay £20m in fines following a case brought by the Environment Agency due to six incidents which took place between 2012 and 2014 when there were illegal discharges of sewage into the River Thames and its tributaries that caused environmental damage and disruption to leisure activities.

Writing in the annual report Thames Water chairman, Sir Peter Mason, described the company now as in a new chapter with the appointment of  Steve Robertson as chief executive in September 2016 and  Brandon Rennet as chief financial officer in March this year. Additionally, the company had appointed a new independent non-executive director Nick Land who is also the new chair of its audit, risk and regulatory committee.