The boss of Thames Water, who was in line for £3.75m bonus for fixing leaks, has been sacked with immediate effect after a row over his failure to reduce leakage, it is understood.

Steve Robertson, who has led the UK’s biggest water company serving 15 million people since 2016, was fired after a board meeting on Friday afternoon. A source at the company said Robertson was asked to leave because the board had decided “he’s not the person to see the business through to the future.”

A Thames spokesman declined to explain why Robertson was leaving the firm so suddenly. The spokesman said the company had no immediate plans to try to clawback the potential multi-million pound bonus that Robertson could collect in 2020.

Robertson’s ousting comes as the Labour party ramps up its proposals to renationalise water and energy networks and campaigns against vast bonuses paid to utility bosses.

The source said the Thames board and employees were embarrassed by being singled out by the regulator Ofwat as one of the country’s worst water companies. It had the worst record on leaks in 2017-18. Earlier this year, the watchdog ordered Thames to “substantially rework and resubmit” its “unconvincing” plans to tackle leakage and reduce customers bills.

Robertson is being replaced by the Thames chair, Ian Marchant, who will become interim executive chair. Marchant said: “I would like to thank Steve for his service as CEO and wish him all the best. He has done a great job leading the company through significant change, putting the building blocks in place for its long-term success. We need to continue to ensure that Thames Water is an organisation that both customers and staff feel proud of.”

Robertson, who was paid a basic £745,000-a-year including a car allowance and handed 25% of his salary towards a pension, said: “It has been a privilege to lead an organisation that touches the lives of so many. I would like to thank all those I have worked with, both inside and outside the company, and am proud of what we have achieved over the last two and a half years.”

Ofwat fined Thames £120m last year for poor management of leaks and said the company had “failed its customers” as it breached two of its legal responsibilities.