Privatisation has had some successes. By introducing profit incentives, the water industry achieved 30 percentage points more cumulative productivity improvement than comparable industries in the 25 years after privatisation, according to Frontier Economics, a consultancy. Power cuts are down by over half since distribution networks entered private hands. Water leakage in England has fallen by over a third. On key metrics, England’s water industry is not obviously worse than those of countries with nationalised industries, like the Netherlands (see table). The benefits of nationalisation are also less juicy than many realise. Take the argument that public ownership is needed to curb monopoly profits. Ofwat and Ofgem, the water and energy watchdogs respectively, have not covered themselves in glory. Sneaky businesses loaded up on far more debt than expected, with the average water company’s debt-to-equity ratio surging from 4% in 1991 to 72% by 2009. This enabled firms to extract outsize returns. But as Ofwat slowly caught on to operators’ tricks, their measure of average returns on equity fell from 13% in the early 1990s to around 3% in 2020-24, according to the Independent Water Commission. Ofgem faced similar problems. Weak oversight allowed some energy retailers to skimp on financial reserves, confident that the government would never let homes go dark. That moral hazard contributed to a rash of supplier bankruptcies in 2021-22, saddling bill-payers with unnecessary costs. But Ofgem has since tightened requirements. The retail market today is a gleaming example of competition’s benefits, with companies like Octopus Energy and e.on vying to offer innovative tariffs. The lesson is not the need for nationalisation, but for sharper regulatory oversight. Meanwhile the idea that public ownership will solve underinvestment misdiagnoses the problem. Although the private sector cut corners, much of the blame for low investment lies with regulators and governments. They rejected proposals for new reservoirs (none has been built for 30 years) and stalled new nuclear power for much of the 2010s. More investment meant higher bills—unpalatable for Britain’s here-today, gone-tomorrow politicians.
The need for new investment will dominate the years ahead. Water-industry spending on enhancements was increased by 300% after a review in 2024. The National Grid needs to quadruple the speed at which it builds out the transmission network to meet Labour’s goal of 95% clean electricity by 2030. Funding this will burn a hole in the public’s pockets. Nationalisation won’t change that. Mr Polanski’s complaints about high debt costs and dividends ignore the fact that much of this reflects repayment for real investment and genuine risk taken by private companies. Under public ownership the state would still need to borrow to fund infrastructure, while absorbing more of the risk when things go wrong. True, the rate on government borrowing might be marginally cheaper, but this does not alter the arithmetic fundamentally. And this ignores the costs of nationalisation. Free marketeers claim nationalising water and energy would drain hundreds of billions from the exchequer’s coffers. This is overstated, as government would get a stream of future revenues from bills in exchange for the upfront payment. But two risks remain. The first is mispricing the purchase. Pay too little and the government signals it cannot be trusted on property rights, deterring global investment; pay too much and any savings evaporate. Second, financing nationalisation through new bonds risks pushing up the yield on all
government debt. In the low-rate 2010s this might have been manageable. Today it is playing with fire. Getting investment going requires not just cash but strong co-ordination. According to the left, privatisation is a recipe for gridlock. The owners of wind turbines, pylons and substations spend so much time squabbling over commercial interests that nothing gets done. As evidence of what public control could achieve, they point to Mr Burnham’s transformation of Greater Manchester’s buses as mayor. In the nearly 40 years after deregulation, passenger journeys fell by half as the network fragmented. Since the city took control of fares and timetables, journeys have been increasing. But Manchester’s buses also puncture the case for full nationalisation. They remain privately owned, with operators bidding for contracts to run services. Dieter Helm, a utilities economist, says the ownership debate is “simplistic”. The more useful question is which functions each side performs better. For him, planning and system design belong in the public sphere; service provision is where private competition adds value. This would not be a radical departure. The publicly owned National Energy System Operator already plans the power grid, and the government is moving in a similar direction for water. Debates about ownership tend to descend into religious fervour. The reality is boringly technocratic. Few would propose renationalising British Airways or British Telecom, where competition brought clear gains; nobody serious would advocate privatising defence. Utilities sit in the grey zone. As monopolies they cannot be left unchecked, but regulation and selective public control over planning would suffice. Starting from scratch, a nationalised model could work. But the transition costs dwarf any benefits. Rebuilding state capacity would take years, distracting from the real questions facing Britain’s utilities. Those trade-offs are pressing. Pursuing the 2030 clean-power target will run up bills. Meeting river-quality standards requires both large investment and a tougher approach to farmers, who pollute more rivers than water firms do. New infrastructure will remain stuck without planning reform to overcome NIMBY opposition.
As Northern Ireland Water shows, these problems don’t disappear under state ownership. The business has complained that “material underfunding” is a major cause of its troubles. Increasing bills, raising taxes or cutting spending elsewhere are the only ways to fund investment ultimately. That’s a question not of ownership, but of political courage. ■ For more expert analysis of the biggest stories in Britain, sign up to Blighty, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//britain/2026/06/09/britains-privatised-utilities-are-a- mess
Britain’s rail nationalisation is going full steam ahead But it risks going down the wrong track June 11th 2026 British commuters moaning about the trains should remember that life could be worse. They could be Germans. Some 91% of British trains arrived within five minutes of schedule in 2024; only 82% of German ones did. The Swiss (punctuality rate: 93%) are so fed up that they are terminating any German trains that arrive 20 minutes late at the border. The struggles of Germany’s state-run operator suggest that public ownership is no panacea. That is a lesson Britain’s Labour Party should heed as it renationalises the railways. The British government now controls 53% of trips, up from 16% in 2023-24, with more to follow. Heidi Alexander, the transport secretary, has promised that Great British Railways (GBR), the
new state operator, will run more services, have simpler fares and provide cleaner lavatories. Labour’s left sees it as step one in a sweeping renationalisation of the economy. The changes so far have mostly entailed daubing the new GBR trains in garish Union Jack colours. Although some services have improved, others, such as the South Western routes (nationalised since May 2025), have seen cancellations increase. Nationalisation is unlikely to solve the railways’ problems. This is partly because privatisation wasn’t the disaster that many claim. The number of rail journeys more than doubled from 700m at privatisation in 1994-95 to 1.7bn in 2024-25 (see chart 1). This was mostly driven by demographic changes, but innovative private-sector ticketing strategies helped. And although passengers grumble about delays, Britain’s trains are on average more punctual than those in most other European countries. Britons’ most legitimate complaint concerns fares. On some measures, they are among Europe’s highest. A peak ticket booked the evening before from London to Liverpool costs £120 ($160), double the price of an equivalent Italian journey. Although advance booking narrows the gap, the country’s railways are undeniably expensive, especially when subsidies are taken into
account. The government provided £12bn in operational support in 2024-25, up in real terms from £2bn in 2000-01 (see chart 2). Nationalisation will not fix these funding woes either. Private train operators were not creaming off excess profits; they barely mustered profit margins of 2% before the covid-19 pandemic. It was the nationalisation-shy Tories who had to put the first four English operators into public ownership because the firms were so broke. Perhaps nationalisation’s most promising benefit comes from better co- ordination. Squabbling between train operators and Network Rail, the state- run body which maintains the track, has plagued the system for decades. In certain households the 2018 timetable fiasco is still not safe dinner-party conversation. Having a single co-ordinating body like GBR should improve services. But it will take years for most benefits to materialise. Public ownership also has costs. Stephen Glaister, a transport academic, warns that GBR could become a “really powerful monopoly”. The public entity will be financially incentivised to prioritise its own passenger services over disruptive private-sector entrants. This is particularly worrying given that the arrival of newcomers like Lumo in recent decades has provided much-needed competition.
Crucially, state ownership will not tackle rising costs. Take Britain’s rail unions. They have opposed efficiencies like ticket-office closures and managed to double train-driver pay in real terms since the 1980s (bus-driver pay has stagnated). Nationalisation will increase the pressure to buy off strikes. It is telling that on being elected in 2024, Labour awarded generous pay rises to train drivers for little in return. Changing travel patterns are another issue. Fewer deep-pocketed commuters and more cost-conscious joyriders have meant that revenue is 12% down on pre-pandemic levels. The Treasury is bristling at the subsidy required and wants to reduce costs. Yet this would require fare rises or less investment. Labour has already shown it will not stomach higher ticket prices, making a fanfare of freezing them this year. And reducing investment will lead to worse services. This is a sticky trade-off, and one public ownership cannot help with. Ms Alexander insists nationalisation is more than “a paint job”. But if Labour sidesteps the underlying problems, it risks becoming a botched one. ■ For more expert analysis of the biggest stories in Britain, sign up to Blighty, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//britain/2026/06/11/britains-rail-nationalisation-is- going-full-steam-ahead
A kids’ social-media ban would be a bad parting gift from Keir Starmer But it perfectly captures the British prime minister’s vanilla brand of populism June 11th 2026 Britain’s slow crawl towards a social-media ban for children is nearing its destination. The recent acceleration has not been fuelled by new policy insights, but by simple political calculation. In the run-up to a much- anticipated by-election in Makerfield on June 18th, which could see Andy Burnham, the mayor of Greater Manchester, return to the House of Commons, Sir Keir Starmer is casting around for ideas to prove he has the vision to stay on as prime minister rather than be replaced by Mr Burnham or an alternative.