For­eign in­vestors erect Cor­byn fire­wall

Com­pa­nies look to move as­sets off­shore to avoid re­na­tion­al­i­sa­tion by fu­ture Labour gov­ern­ment

The Sunday Telegraph - Money & Business - - Front page - By Jil­lian Am­brose and Anna Isaac

RIS­ING fears of a Cor­byn gov­ern­ment are prompt­ing for­eign in­vestors in Bri­tain to pre­pare le­gal counter-mea­sures to pre­vent their as­sets be­ing na­tion­alised against their wishes.

The Sun­day Tele­graph has learnt that the Canada Pen­sion Plan In­vest­ment Board (CPPIB), a ma­jor in­fra­struc­ture in­vestor, is in talks aimed at putting its one-third stake in Anglian Wa­ter, ac­quired for £2.3bn in 2006, be­yond the reach of a po­ten­tial Labour gov­ern­ment. City sources said CPPIB, one of the world’s big­gest pen­sion funds, is in talks to trans­fer its Anglian shares to a hold­ing com­pany based in Hong Kong.

The work is un­der way amid Brexit re­lated chaos in West­min­ster that it is feared could trig­ger a Gen­eral Elec­tion that may open the door to a rad­i­cal leftwing gov­ern­ment.

Kal­lum Pick­er­ing, of Beren­berg Bank, said that the UK “could be trading one risk for an­other” as the chances of a hard Brexit have fallen, but that of a Labour elec­toral win had risen. There is now a 30pc prob­a­bil­ity of Cor­byn-led Gov­ern­ment, he said.

The bi­lat­eral treaty be­tween Bri­tain and China that governed the han­dover of Hong Kong in 1997 pro­vided pro­tec­tion against ex­pro­pri­a­tion of as­sets by the state. The agree­ment was de­signed to en­cour­age UK com­pa­nies to con­tinue to in­vest in the ter­ri­tory un­der the con­trol of Bei­jing and the Com­mu­nist Party, but its shel­ter is now be­ing sought by for­eign in­vestors in Bri­tain.

Jeremy Cor­byn and the shadow chan­cel­lor, John Mcdon­nell, plan to tar­get the wa­ter in­dus­try first in a wave of re­na­tion­al­i­sa­tions if they gain power. Labour has sharply crit­i­cised util­ity com­pany fail­ures on pol­lu­tion and gen­er­ous div­i­dends to share­hold­ers.

About half of Bri­tain’s wa­ter com­pa­nies are owned by for­eign in­fra­struc­ture in­vestors, who fear their as­sets could be stripped from them at knock­down rates un­der Labour.

The plans to bring wa­ter com­pa­nies back into pub­lic con­trol could cost the UK tax­payer about £90bn, ac­cord­ing to es­ti­mates, and also threat­ens to wipe bil­lions from in­fra­struc­ture fund in­vest­ments if Labour “un­der­pays” for the com­pa­nies.

The party is ex­pected to pay the “book value” for each wa­ter com­pany, which over­looks the value of the util­i­ties’ reg­u­lated as­sets.

In the case of Sev­ern Trent and United Util­i­ties the dif­fer­ence could be about £2.1bn and £2.5bn re­spec­tively, ac­cord­ing to an­a­lysts at Bern­stein. In­vestors will have the best chance at re­claim­ing the full value of their in­vest­ments if their as­sets are based off­shore, ac­cord­ing to law firm Clif­ford Chance.

The le­gal gi­ant said ear­lier this year that “na­tion­al­i­sa­tion for less than full mar­ket value will, al­most in­evitably, trig­ger com­pen­sa­tion claims by in­vestors. The in­vestors likely to have the best chance of launch­ing a suc­cess­ful claim are those based in a ju­ris­dic­tion that is party to an in­vest­ment treaty with the UK, in­clud­ing, for ex­am­ple, China, Hong Kong and Sin­ga­pore.”

The move is likely to raise hack­les among wa­ter bosses who are hop­ing to clean up the rep­u­ta­tion of the in­dus­try, once ac­cused of al­low­ing own­ers to drain the util­i­ties of div­i­dends while avoid­ing pay­ing tax. Steve Robert­son, the chief ex­ec­u­tive of Thames Wa­ter, said he has not dis­cussed any changes with his com­pany’s own­ers.

Thames is part-owned by Omers, an­other Cana­dian pen­sion fund, which de­nies any plans to off­shore its in­vest­ment.

“I’m not sure how that would be re­ceived. For ex­am­ple, we’ve gone through a lengthy process to shut our Cay­man Is­lands sub­sidiary – and the di­rec­tion of travel, strate­gi­cally, is some­thing that has been wel­comed. This wouldn’t be some­thing con­sis­tent with that,” Mr Robert­son said.

A Labour Party spokesman said: “Pub­lic own­er­ship of rail, wa­ter and en­ergy is mas­sively pop­u­lar be­cause peo­ple are fed up with fat cat bosses run­ning down ser­vices and hik­ing up prices and div­i­dends for share­hold­ers.”

Shadow chan­cel­lor John Mcdon­nell, left, and party leader Jeremy Cor­byn will tar­get the wa­ter in­dus­try

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