British water and power firms are trying to soothe nerves over nationalisation, in the event of a Labour government, although some fund managers and lawyers doubt so-called Corbyn-proofing will work.
Jeremy Corbyn, the opposition leader, has said the state would take control of Britain’s water, electricity, gas, and railway operators, as well as Royal Mail and Royal Bank of Scotland, if Labour wins power.
The privatisation of utilities, which began in the 1980s under Margaret Thatcher’s Conservatives, has been a divisive issue.
Advocates say consumers get a better deal; critics argue that there is no place for profit in public services.
Now, with Labour gaining in the polls and a general election seen as more likely, following a delay to Britain’s EU departure, companies and investors are taking the possibility of nationalisation seriously.
Thames Water, for instance, added a clause to its bonds to ensure holders are repaid immediately, should it be nationalised. Bankers say this reflects demand for extra protection, as investors grow more wary about British utilities.
While references to nationalisation as a default event for utility companies are not new, several lawyers said they are seeing a surge in company inquiries about inserting such clauses, as well as an increase in investment firms seeking advice.
Many foreign pension and investment funds were opting to shift their stakes in UK utilities to jurisdictions such as Hong Kong, where bilateral treaties protect against asset expropriation. Lawyers said this process is continuing.
“Your biggest fear, as a bond investor, is if your bond gets nationalised for less than market value,” said Dan Neidle, a partner at Clifford Chance.
“Labour have said they will honour the debts of nationalised businesses, but a large number of investors and infrastructure businesses remain concerned. The discussions we are having are increasing over time,” said Mr Neidle, without giving any names.
Some companies began seeing higher borrowing costs last year and a London-based capital markets banker highlighted the case of Western Power Distribution, which was unable to tighten the pricing on a £350m (€405m) bond in October.
“We have seen some foreign investors hold their hands up and say we are not looking at UK infrastructure,” said the banker.
“There were a lot of questions about Corbyn on the roadshow.”