Avner Offer, Understanding the Private-Public Divide: Markets, Governments and Time Horizons

Excerpt

The saga in the UK of the near-failure (in 2023) of Thames Water, a privatized utility with a monopoly of water and waste services to London and the South of England, serves as a monument to the failure of the application of the public philosophy of “free markets” to essential infrastructure. The previously nationalized company was sold in 1989 to private investors in the wave of privatizations introduced by the Thatcher Government. Since 2006 it has been majority-owned by a small number of private equity groups specializing in infrastructure. As Brett Christophers (2023) has recently documented, this form of ownership is a pure rentier activity: the infrastructure assets are purchased with debt finance, their operation is contracted out, costs including maintenance are squeezed, while interest and dividend payments and asset-stripping hollow out the entity. Thames Water is now asking its shareholders for more investment, including to complete the multi-billion pound Thames Tideway project, the first increase in capacity in London’s sewerage system since it was built by Joseph Bazalgette in the 1860s. They might or might not pay up, but if not renationalization of the company is not out of the question. …