Power To The People? Not Likely!

I promised to examine the impact of foreign investment, especially in infrastructure.

No better example than the power industry.

Almost every UK utility is owned by overseas investors - and look at the impact.

Every one of these operators seems to be reporting increased profits, often double-digit increases. However, in almost every case, the same companies have announced their tariffs are to be increased. The increases are mostly far in excess of what would be justified by matching inflation.

Some people would say that owning a utility is a licence to print money - on current evidence, it would be hard to argue with that assessment.

Consider also the water utility providers.

When they were "privatised" i.e. shares offered to the public, the publicity material played up the fact that these new PLCs would be able to afford the massive investment required to ensure an improvement in the standard of water and sewage services in the UK.

The result? Almost every year we face hosepipe bans in some part of the UK because of inadequate reservoir provision.

What happened to all that capital investment we were promised?

PLCs must pursue profits to support the maximum dividend for their shareholders. That is not necessarily a model that fits with long term investment e.g. building reservoirs.

The case for renationalisation is strong.

Thursday, 15th November 2012

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