The UK’s utility department is preparing to fight a future Labour government with Severn Trent issuing a warning that the party’s nationalization plan would increase water bills by huge amounts. Britain’s National Grid had already warned that this will increase costs to taxpayers and slower the transition to green energy thus increasing the carbon footprint of the country. Severn Trent’s CEO highlighted a study by British water regulator Ofwat that water costs of the consumers would have increased by 120 pounds a year per person if the water industry had not been privatized.
The Labour Party’s shadow chancellor of the exchequer, John McDonnell, however, said that a future Labour government will have to pay investors only 15 billion pounds to nationalize the water industry. The market value of the investments were at least 44 billion pounds until now. The calculation mentioned by Mr. McDonnell comes from a company named Moody’s which assessed the book value of the shareholder equity of the 15 UK utilities. At the same time, different agencies have also calculated the industry’s assets. Ofwat calculates the industry’s total assets to be 73 billion pounds including debt.
The Social Market Foundation calculates the UK utilities’ market value at 44 billion pounds while estimating that nationalization will cost 90 billion pounds. Labour’s proposals have shaved 5 percent off the share prices of Severn Trent and other UK water utilities. According to the opposition party, water bills in the UK have risen 40 percent in real terms since privatization in the year 1989. Mr. Garfield from Severn Trent said that between paying large dividends and investing in services, the company would choose to invest in services than the former option.
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