Nationalize Stelco?
Meanwhile, ironically...
Carney warns Burnham over Thames Water nationalisation
Canada calls for compensation for its investment in utility if Prime Minister goes down route of state control
Mark Carney has intervened over the potential nationalisation of Thames Water with a warning that it could damage foreign investment in Britain.
Canadian officials are growing increasingly concerned that any decision by Andy Burnham to place Thames Water under state control could result in heavy losses for overseas investors.
Ottawa is thought to have cautioned that any expropriation of privately owned assets without accompanying compensation could jeopardise further investment in the UK economy. Canada’s so-called Maple Eight pension funds, and its banks have poured tens of billions into airports, ports, the energy sectors, key utilities and property.
The dramatic intervention underscores mounting anxiety about the Prime Minister’s hostility towards the private sector. Mr Burnham has promised to “end neo-liberalism” and undo
Margaret Thatcher’s legacy of privatisation and deregulation.
Yet private property rights are a fundamental pillar of the UK’s legal and economic system, and one of the key protections that make Britain a top destination for overseas capital.
Ottawa was lobbying primarily on behalf of the Royal Bank of Canada (RBC), the country’s national bank champion. It is not known whether the Canadian officials were acting on the instructions of RBC senior figures or independently.
The discussions are understood to have occurred in recent weeks. Mr Carney met the Prime Minister on a visit to Liverpool last month where the pair watched Everton football club, who they both support.
RBC is a senior creditor to Thames Water, and is among a consortium of more than 100 financial institutions that has proposed a £16bn rescue package in which around a third of the supplier’s borrowings would be written off in return for ownership.
However, many of the creditors fear being wiped out if ministers follow through with a threat to seize control of the company instead. Industry sources insist RBC’s concerns are shared by many of the other lenders to Thames.
Both Ofwat and ministers have refused to give the proposal their blessing. Instead, Burnham has made repeated yet vague threats to exert greater “public control” over the failing water industry. It is these remarks that prompted Canadian officials to intervene.
A creditor told The Telegraph: “We are still trying to understand what ‘public control’ is, and what the Government wants to do with Thames. None of us know the answer.”
Another said: “They are not looking for abnormal treatment. They just want fair value, whether that’s through nationalisation or a financial restructuring, and for their security to be respected.”
The uncertainty threatens to derail discussions about another round of rescue funding for Thames Water. Having already lent the company £3bn to keep it afloat for the last 18 months, creditors have been asked to
provide another £2.4bn of liquidity.
Earlier this month, Dave Mackay, RBC’s chief executive, warned the UK Government about the risks of creating a more hostile environment for foreign and private capital.
In an interview with the Sunday Times, he said: “When the UK flirts with nationalising … Thames Water, with putting on a bank tax, with putting a capital tax on the wealthy or housing, it sends a signal you want to harvest your economy, not grow it.”
RBC has also privately expressed frustration at the failure to distinguish between institutional investors who are longstanding lenders to Thames Water and some of the more opportunistic funds seeking to profit directly from Thames’s financial predicament.
In September, a cross-party committee of MPs
urged ministers to reject the creditors’ recapitalisation plan.
The environment, food and rural affairs committee criticised the “opaque consortium of 100 hedge funds and others” who are
seeking to take control of Thames Water and said the Government should consider placing the utility into special administration, a form of temporary
However, a source close to the creditors said more than half of its lenders – including RBC – would not consider themselves to be hedge funds.
“Many of those that are being unfairly stigmatised are long-term holders of UK assets,” the person said.
RBC and a spokesman for the creditors declined to comment. The Canadian High Commission was approached for comment.
