Britain For Sale: Who is Profiting From Our Nation’s Infrastructure?

Britain For SaleWho is Profiting From Our Nation’s Infrastructure?

Pete Syme investigates the countries and companies that are taking a slice of our national assets

What do Thames Water, Heathrow Airport and the M6 Toll Road all have in common? It isn’t the set up to a punchline, but the sorry joke of the UK’s privatised infrastructure.

Under former Prime Minister Margaret Thatcher, everything from airports to water companies were sold off to investors in the belief that it would boost efficiency and profits. But this has often come to the benefit of international conglomerates and authoritarian regimes. 

The sovereign wealth funds of Qatar and China own stakes in the likes of Heathrow Airport and Thames Water, as well as prominent icons like Harrods, the Shard, and the ‘Walkie Talkie’ in central London. Some 60% of the National Grid’s gas network is owned by a consortium which includes the Qatar Investment Authority.

The nations involved have gained political authority in the UK as a result, with the likes of Qatar and Saudi Arabia praised highly by domestic leaders.

When John Major introduced the private finance initiative (PFI) in 1992, it aimed to promote public-private partnerships, or PPPs. These contracts involve private companies funding government projects, often vital infrastructure like hospitals or roads, and then drawing profits from its users. The programme was further expanded when New Labour took power, introducing the controversial National Health Service (Private Finance) Act 1997. 

The initiative was discontinued in 2018, but the outsourcing of government work is now widespread – witnessed in particular during the pandemic, with at least £46.7 billion in contracts awarded to private-sector providers.

Perhaps the most controversial PPP in recent years is that of Hinkley Point C, a nuclear power station under construction in Somerset. One-third of the cost is being financed by the state-owned China General Nuclear Power Group. While the Government has spoken about ending its involvement, geopolitical tensions seem to have preventing this from happening so far.

China also has a stake in the Sizewell C nuclear station, but the Government is looking for new investors in order to force China out. The country’s involvement in British infrastructure has come under closer scrutiny after Huawei was banned from installing new 5G equipment in 2020. 

A Byline Intelligence Team investigation also unearthed official Department for International Trade documents revealing the Government’s desire to encourage Saudi firms to invest in its flagship ‘levelling up’ agenda. Qatar, meanwhile, has already pledged its support – with the hereditary monarchy committing £10 billion in investment to the UK over the next five years.

Foreign Secretary Liz Truss last year launched British International Investment, offering finance to developing countries, telling the Financial Times that Britain now offers “alternatives” to taking on “strings-attached debt from autocratic regimes”. Yet these same regimes are profiting from Britain’s own infrastructure.

---

The Profit Motive

I recently spoke to campaigners in London’s Docklands, fighting to stop the Silvertown tunnel. While west London has 11 river crossings for motor vehicles, the East End has just three, making the Blackwall tunnel one of the capital’s busiest roads.

Transport for London (TfL) hopes that Silvertown will alleviate this congestion, aiding the city’s climate strategy, but activists say that expanding capacity will only encourage more traffic – a phenomenon known as induced demand. This could introduce more pollution to the local area of Newham, which already has the country’s worst air quality, and is one of London’s most deprived boroughs.

The plan to keep traffic manageable is to introduce a toll at both Silvertown and Blackwall, which is currently free. In 2019, TfL awarded a design, build, finance and maintain contract for the tunnel to the RiverLinx consortium, a Special Purpose Vehicle set up for the project, as is the case in most PPPs. The Silvertown tunnel is expected to cost £2.2 billion in construction and maintenance, and TfL will repay the consortium using revenue from the tolls.

Aside from anything else, this means the infrastructure divide between east and west London will become even more pronounced, leaving London with just one free road crossing east of Tower Bridge. 

Australian bank Macquarie is the consortium’s “lead equity sponsor and sole financial advisor”. But Macquarie has a history of infamous dealings in British infrastructure. The bank was nicknamed the ‘Vampire Kangaroo’ by British media, with the Sunday Times lambasting its “sprawling interests and ruthless profit taking”. Before Thames Water was sold to a consortium including the sovereign wealth funds of Abu Dhabi and China in 2012, Macquarie came under fire for its management of the country’s largest water services company. A BBC investigation found that Thames Water borrowed £2 billion, used for the benefit of Macquarie but leaving the company with the debt. This March, Macquarie led the purchase of 60% of the National Grid’s gas network. 

Macquarie was also named in the 2017 Paradise Papers. The documents originate from the law firm Appleby, which specialises in setting up companies in offshore tax havens. 

In 2006, its subsidiary Macquarie International Advisory Limited was incorporated in the Isle of Man, where the corporate tax rate is zero. The following year, a select committee investigating the firm’s management of the Isle of Man Steam Packet Company said that Macquarie International Advisory was paid the majority of “significant” management charges, to the tune of £3.2 million.

Another entity registered at the bank’s London office is Macquarie Juweel Investor LP, which owns shares in a Cayman Islands company called Juweel Investors Limited. European Union documents show that Juweel is controlled by Qatar’s sovereign wealth fund, and manages a $900 million stake in American Express Global Business Travel. 

Macquarie declined to provide an on-the-record comment for this article.

The difficulty is that construction can rarely go ahead without the backing of private investors. The infamous Garden Bridge across the Thames and a pedestrian-cycle crossing at Rotherhithe were cancelled after budget difficulties, with private funding being either non-existent or inadequate. 

In Boris Johnson’s resignation speech, he argued that his Government’s “vast programme of investment in infrastructure” was “the biggest in a century”. The UK Infrastructure Bank, set up last June, has a £22 billion capacity to provide state loans for projects as part of the levelling up agenda, but we still see PPPs being used.

The Green Investment Bank set up by David Cameron had a similar philosophy – capable of investing money into eco projects. After five years, however, it was sold off to Macquarie for £2.3 billion, after then-Business Secretary Sajid Javid argued that it needed access to private capital.

Doug Parr of Greenpeace said that “selling a great British success story, which levered private money into eco-projects, to a controversial Australian bank known for asset-stripping, is a disaster”.

Macquarie combined the bank with its UK renewable energy investing business, claiming that the deal would create one of Europe’s largest teams of green energy investment specialists.

Meanwhile, the announced creation of Great British Railways last year was lauded as a sign of re-nationalisation for the country’s chaotic train infrastructure, ending the system of passenger rail franchising. But while the Government will set the timetables and collect fare revenue, private operators will still be contracted to run the trains. Indeed, the Government emphasised that “there will remain a substantial and often greater role for the private sector”. 

The private sector is now firmly embedded in British infrastructure development. And while Chinese involvement has raised concerns at the top level, other controversial firms and nations are welcomed with open arms. Geopolitical relationships, a lack of accountability and an unwillingness to spend public money on infrastructure ultimately mean that Britain is up for sale.