Britain’s privatisation disaster: the figures speak for themselves

HubMP2012

SEPTEMBER 18, 2O25

A new project by progressive thinktank Common Wealth details the shocking results of the UK’s unprecedented privatisation experiment.

Britain is a country remade by a radical experiment: the unprecedented privatisation of our essential services and infrastructure.

The results of the experiment are in. Ordinary people pay more for less. Their energy bills are sky-high. Their public transport is unreliable. Waterways are polluted. A corrosive housing crisis degrades living standards.

Everywhere, there is a pervasive sense that nothing works and that we have lost control. No wonder the public is furious.

Chris Hayes, Chief Economist at Common Wealth, told Labour Hub: “Utilities have failed to invest, preferring to sweat their inherited assets, overwhelmingly built by public entities. And people blame regulators for failing to solve the problems created by this privatisation process in the first place.

“Restoring public ownership of key infrastructures together with sound governance is no silver bullet, but it is a necessary step to recovering some semblance of coherence to how key services are run.”

Reversing decline requires rebuilding Britain: creating abundant housing, homegrown clean power, high-quality transport and modern water systems — twenty-first-century infrastructure as the foundation of a free, secure society.

The privatisation of essential services has incentivised asset sweating over asset building, financial engineering over real engineering, extracting over investing, private profits over public needs. National renewal requires making life secure and affordable for working people.

This means replacing a business model that encouraged privatised utilities to load themselves with debt to pay bigger and bigger dividends while skimping on investment. And, by securing subsidies or derisking guarantees from the state, they lumped a captive public with the cost for essentials twice over: through their taxes and in higher bills. Unless we change this model, life’s essentials will remain a stressful and costly burden for the public and a cash machine for the privateers.

Who Owns Britain? examines this failed model by identifying who profits from ownership of our energy and water systems, from transport and housing to care and mail services, and analyses how privatisation shapes the country and our lives.

Key findings from this fresh analysis include:

1. The scale of Britain’s privatisation experiment was unprecedented.

From the early 1980s to the late 1990s, the only advanced economies that experienced a faster and deeper decline in gross public wealth than Britain were those affected by the ‘shock therapy’ of the oligarchic and corrupt post-Soviet transition. The historic collapse in Britain’s public wealth dismantled a coherent national economy, worsened inequality and weakened state capacity.

• The UK shed public wealth at a rate of 7.4% of national income per year for 15 years between 1981-1996.
• Gross public wealth went from the highest in the G7 to the lowest, where it has stayed ever since.
• An estimated 780,000 council houses, now worth £176bn, are estimated to have entered England’s private rental sector via Right to Buy.

2. The public pays a ‘privatisation premium’ that makes essentials more expensive.

The public pays twice over for privatised essential services: through higher bills and fares to pad corporate profits and fund shareholder payouts, and through their taxes that backstop public subsidies of private companies. This privatisation premium worsens the cost of living crisis and transfers money from ordinary households to international investors.

• Nearly a quarter of the average energy bill in 2024 was profit — £416.
• Almost a third of the typical water bill now goes to investors in the form of dividends and interest payments.
• Half of the train industry’s income is from direct and indirect public subsidy.

3. Billions leak out of essential services every year that could be reinvested.

Billions of pounds each year are diverted toward shareholder payouts and expensive interest repayments. This money could be reinvested to improve services and cut bills. The higher cost of capital faced by privatised utilities compared to government borrowing means their financing of essential infrastructure investment typically costs more than public investment would.

• Almost £200bn has been paid to the shareholders of water, energy, mail and transport companies since the 1990s.
• In 2023 alone, the nine largest electricity generators and the energy networks spent £8bn on dividends, share buybacks and interest payments.
• Throughout the last decade, the rail companies have consistently paid out more than 100% of their post-tax profits in dividends.

4. Privatised monopolies have created dysfunctionality as well as unfairness.

Fragmentation, market power, duplication and complex bureaucracy inherent to the regulation of privatised monopolies have created operational inefficiencies and extra costs borne by the public.

• Unbundling the constituent parts of the energy and transport system has undermined effective coordination between them, requiring extensive and expensive state intervention. Electricity generators enjoyed pre-tax margins of 32% in 2024, which could have been reduced with a more rational wholesale market and balancing mechanism.
• Despite public expense, public transport has been cut back. Almost half of the bus industry’s income comes from public subsidy, but commercial routes have fallen by 20% since 2019, due to cherrypicking and inefficient coordination. Before deregulation, more profitable routes could cross-subsidise others, benefiting women, the young and the poor.
• We estimate that the additional operating costs of the passenger rail system attributable to privatisation from 1997 to 2020 totalled a cumulative £79bn. We estimate that the additional operating costs of the passenger rail system attributable to privatisation from 1997 to 2020 — for example, interface costs from outsourcing and unbundling, cash leakages to investors, and cleaning up the mess from successive crashes after Railtrack cleared out all their in-house engineers — totalled a cumulative £79bn.

5. Privatisation has failed to deliver adequate investment in essential infrastructure.

Privatisation reduced investment for several reasons. Companies delayed capital expenditure to boost profits, faced higher capital costs and sweated inherited public assets. Regulatory game-playing created bureaucratic delays. Over-leveraging became common as companies prioritised investor rewards over investment capacity. These are features, not bugs.

• The energy sector invested twice as much as a share of GDP under public ownership compared to the privatised era.
• The energy networks have underspent on eleven of the last twelve Ofgem-approved capital expenditure rounds, meaning that customers are paying for investment that did not materialise.
• The water companies have taken out more debt than Ofwat recommends every year since 2002, leaving them overleveraged and fragile. Yet, the private sector has failed to build a single major reservoir since the water industry was privatised.

Privatisation of essential services collapsed public wealth and undermined the nation’s capacity to build. Essentials are more expensive and basic services are in a sorry state. Privatisation transferred hundreds of billions of pounds from a captive public to passive shareholders. It has run down Britain’s infrastructure and is badly designed to rebuild it.

We are weaker, poorer and less equal as a result.

Explore Who Owns Britain? Dig into the interactive Data Dashboard and trace how essential services that once belonged to us are in the hands of a new caste of owners: international asset managers, foreign governments and private equity giants.

Read the Visual Essay and follow the Williams family in Manchester from cradle to grave, revealing the invisible web of ownership and profit — the hidden pattern of our lives.

Visit Who Owns Britain? Read and share the launch thread on Twitter/X and Bluesky, and launch video on Instagram.