A new report from NERA Economic Consulting is warning that nationalising UK utilities would cost the British taxpayer around £182 billion.

The new research study on the impact of nationalisation of utilities on UK household savings’ and pensions was commissioned by Anglian Water, Severn Trent, South West Water, and United Utilities.

Following the Labour Party’s announcement of its intentions to nationalise public utilities, commentators have started to consider the potential costs and benefits of nationalisation of water companies, energy networks and the Royal Mail.

NERA said that while the details of a potential nationalisation plan are still unclear, a future Government would need to pay at least the fair market value, at a cost to the taxpayer of around £182 billion, to avoid UK households suffering losses to their savings and pensions.

The report is also warning that water company employees 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 if the companies were nationalised at the regulated capital value.

UK local authority pension funds invested in the sector could also see their members particularly adversely affected. Some UK pension funds have substantial investments in the sector, and their members will be particularly adversely affected. Anglian Water, for example, is in part owned by the Greater Manchester Pension Fund, Lancashire County Pension Fund, London Pension Fund Authority, Merseyside Pension Fund and West Yorkshire Pension Fund.

The research finds that if a future Government were to pay a price below market value to acquire UK utilities, investors in these companies would suffer a direct financial loss. Investors would be receiving less money than their investment is worth in the market. In this case, direct financial losses would be equal to the difference between:

• the market value of the companies (excluding the effect of the announcement of the potential nationalisation on market price); and
• the compensation received.

A report published in February this year by the Social Market Foundation think-tank assessing the likely costs associated with nationalising the water and sewerage industry in England concluded that the best estimate gives a ‘takeover value’ of £90 billion.

Commenting on the new NERA study, 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.”

Click here to download the NERA study The impact of nationalisation of utilities on UK households’ savings and pensions