Taking Stock 

Some markets are freer than others

Mark Robinson

Some markets are freer than others

It doesn’t take much to reignite the political debate over the state privatisations of the 1980s-90s – the issue still resonates, not least of all from an investment angle. In last week’s Sector Focus we highlighted some of the potential implications surrounding Ofwat’s price review in 2019, with the regulator faced with the usual conflicting demands of City fund managers, retail investors and consumers. Shares in privatised utilities are often referred to as ‘proxy bonds’ – and with good reason given the way regulatory frameworks were structured prior to the wave of privatisations, coupled with their subsequent implementation by industry watchdogs. In the case of the privatised water utilities, an obsession with dividend pay rates has come at the expense of industry balance sheets; leverage has soared while net profits have found their way back to shareholders. Little wonder that so many home-grown water companies are now in the hands of foreign competitors, sovereign wealth funds and pension schemes. 

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