One of the largest sovereign wealth funds in the world has announced that it will not be investing in the UK’s regulated utilities for water, electricity and natural gas. This is a major blow to Labour’s hopes of attracting global investors. It can be revealed that the Singapore sovereign wealth fund GIC, along with a number of other overseas investors, has decided not to look at UK opportunities in the regulated utilities sector, following the crisis surrounding Thames Water, Britain’s largest water company.
Steve Reed, environment secretary, was informed of this bruising message in a meeting held privately in the City offices Slaughter and May, a law firm from the “magic circle”. Sources said that after a cordial start, the meeting became “politely antagonistic” when investors in charge of managing hundreds of millions of pounds warned of parts of the UK being uninvestable. Sources say that one person said “the UK has completely slipped off our radar right now” due to the fact that regulators are “too unpredictable”.
The revelations are a major blow for Sir Keir and Rachel Reeves who rely on foreign investment to achieve their ambitious growth plans. Whitehall is becoming increasingly frustrated at the lack of interest from foreign investors in the vision of Labour’s government. Jonathan Reynolds, business secretary, said he was “sick” that the UK lost out to France, Spain, and other countries. He said that Labour would unveil its “industrial strategy” in the near future and hoped to attract global investment from rival countries.
Reed was informed in no uncertain words by major investors about the ramifications of Ofwat refusing to allow water companies increase their bills as much as they wish. This would have a negative impact on investment in regulated utilities. Investors claim that raising water bills will allow them to upgrade outdated infrastructure. However, the regulator wants to limit price increases for customers and force firms to provide upgrades more efficiently.
Global investors are influenced by the crisis at Thames Water.Reed was told by sources: “If Ofwat can be so unsafe, why would we think [the gas and electricity regulator] Ofgem?”
Macquarie, a Macquarie-owned Australian infrastructure company, and Abu Dhabi Investment Authority are believed to have sent representatives. Sources close GIC stated that the group’s negative attitude towards regulated utilities is shared by all. GIC is still bullish about other UK investment opportunities, they said. Some people, however, said that they appreciated the fact that the government took the time to hear their opinions. This roundtable was not organised in at least four year.
The government is scrambling in order to organize a flagship summit on investment next month. Sky News reported only 150 out of 300 companies ministers pledged to bring in just weeks earlier had confirmed their attendance. Larry Fink is the CEO of BlackRock, a major investment company.
According to the Sovereign Wealth Fund Institute, GIC has assets totaling more than 800 billion dollars, making it the seventh largest sovereign wealth fund in the world. Approximately 5 percent of GIC’s investments are in the UK.
GIC has a number of notable assets in its portfolio, including Paddington Central in London that it shares with British Land as well as a 10% stake in Heathrow Airport. The fund sold its 17.5% stake in Bluewater Shopping Centre in Kent in July for £120 Million. Jonathan Reynolds, business and trade minister, is “sick of” the UK losing to France and Spain GIC’s spokesman said: “GIC set up its European headquarters in the UK back in 1990. GIC has invested in the UK public and private market for more than 30 years.
We remain committed to UK and will continue to search for investment opportunities which will add value to our global portfolio. A Defra spokeswoman said: “These were productive talks about the significant investment opportunities that exist in a reformed sector of water where we upgrade our creaking infrastructure and clean up our rivers and lakes.”
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