Pay £182bn to renationalise or savers and pensioners will suffer

The average UK household would lose hundreds of pounds in savings and pensions if government nationalised water companies, energy networks and Royal Mail below the fair market value of £182bn, according to a NERA report commissioned by Anglian Water, Severn Trent, South West Water and United Utilities.

NERA illustrated that the loss would be £510 per household, should utilities be taken back into public hands at Regulatory Capital Value rather than fair market value (calculated as £140bn RCV x 1.3 – the market-to-asset ratio before the Labour Party’s nationalisation policy announcement in May 2017).

The £510 is a combination of £310 (£8.4bn total) lost from RCV-only valuation, plus £200 (£5.5bn) from the indirect effect of nationalisation on UK savers and pensioners holding UK gilts. NERA pointed out this is the average loss, and that some households would be harder hit: “As an example, an employee with a shareholding of £10,000 built up through an employee share scheme, which involves one half to three-quarters of all employees of listed water companies, would face a loss of around £2,300 where the companies are nationalised at the regulated capital value. UK local authority pension funds invested in the sector could also see their members particularly adversely affected.”

The economics consultancy further pointed out the average household cost would be £670 should only debt holders (not equity) be compensated by government. And that the the £182bn figure excludes the cost of early redemption of corporate debt.

Water UK chief executive Michael Roberts commented: “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.”