Water renationalisation could cost public £8.4 billion

Water employees could be thousands of pounds out of pocket if Labour does not pay full market price for its planned renationalisation of the industry, a new report has warned.

According to new research from NERA Economic Consulting on the impact of utilities nationalisation on UK household savings’ and pensions, £182 billion is the fair market value (FMV) of the water and electricity network companies that Labour has pledged to bring back into public ownership.

The report, which was commissioned by water companies including Severn Trent and Anglian Water, estimates that the loss for the average UK household would be around £510 if the government paid the £140 billion regulated capital value (RCV) of the companies.

The consultancy has calculated both the FMV and RCV figures on the value of the companies in the period running up to Labour’s surprise 2017 general election manifesto announcement that it wanted to restore public ownership over key utilities.

However NERA says the impact would be worse for some households, giving as an example those in employee share scheme, which embraces half to three-quarters of those working for listed South West Water, Severn Trent and United Utilities.

Those with a shareholding of £10,000 would face a loss of around £2,300 if these companies were renationalised in line on a RCV basis, it estimates.

The report also says members of UK local authority pension funds, which are invested in the sector, could be ‘particularly adversely affected’.

As an example, it says the Greater Manchester, Lancashire, London, Merseyside and West Yorkshire local government pension schemes all have stakes in Anglian Water.

Based on estimates that British households collectively own one-fifth of the UK stock market through their investments, the report calculates the direct loss to UK savings and pensions would amount to approximately £8.4 billion of the overall £42 billion difference between the RCV and FMV.

These losses would more than double to £18 billion if Labour offered shareholders no compensation.

Responding to the report, Water UK Chief Executive Michael Roberts said: “Nationalisation in England raises serious questions about the consequences it would have and this report is a useful reminder to politicians to think carefully.

“The report shows that nationalisation could be expensive for government and taxpayers, with the public potentially feeling the pinch in losses to their own savings and pensions. No-one would want to see a situation where people lost out.”