National Grid and SSE shift to overseas ownership to counter Labour nationalisation plans
The backlash to Jeremy Corbyn’s sweeping nationalisation plans has begun, as two of the UK’s leading power companies said that they had shifted ownership of their British operations overseas.
The Sunday Times revealed that SSE and National Grid had confirmed that they had set up offshore companies in Switzerland and Luxembourg and Hong Kong respectively to defend themselves against Labour’s policies.
Read more: Labour’s nationalisation plans: the threat and opportunity
These three countries have “bilateral investment treaties” with the UK which mean that investors are protected in the event of a state asset grab.
While the moves in themselves cannot prevent renationalisation, they would force Corbyn to pay a higher rate to take control of the businesses.
Last week Labour released its manifesto, with plans to nationalise the rail, water and electricity industries, as well as the Royal Mail and BT Openreach, in plans that sent shockwaves around the UK business community.
SSE, which is worth £13.6bn, said it had shifted both its electricity distribution business and its high-voltage network in Scotland to a Swiss holding company.
In a statement, the company said: “SSE has incorporated in Switzerland a direct and wholly owned subsidiary company to acquire, oversee and hold investments or other financial assets.
“The company has become the holding company for SSE’s electricity transmission and distribution networks through a share-for-share exchange. This is intended to support long-term investment in low-carbon infrastructure in SSE’s core businesses.”
In a call to journalists after the announcement of SSE’s results earlier this month, chief executive Alistair Phillips-Davies said Labour’s plans would be hugely disruptive for the industry and could risk the UK’s leadership position in offshore wind
£31bn National Grid, which owns the UK’s power cables and gas pipelines, said:
“Labour’s proposals for state ownership of National Grid would be highly detrimental to millions of ordinary people who either hold shares in the company or through their pension funds — which include several local authority pension funds.
“To protect their holdings, and in line with our legal fiduciary duty to our shareholders, we have established holding companies in Luxembourg and Hong Kong. This has no financial benefit to the company and does not affect its day-to-day operations. It is solely to protect our shareholders’ interests.”
The electricity giants, which between them own the majority of the UK’s power distribution system, follow utilities companies such as Anglian Water and Yorkshire Water in creating overseas subsidiaries.
Read more: Jeremy Corbyn labels Labour nationalisation plans as very modest
Fellow utility Severn Trent is said to be considering taking similar steps after it was revealed in May that Labour would purchase the UK water industry at a discount rate to take account of “asset stripping since privatisation.”
Shareholders would be given government bonds as a means of compensation.