Global investors warn Labour: UK utilities are ‘off our radar’

One of the world’s biggest sovereign wealth funds has declared it will not invest in the UK’s regulated water, electricity and gas utilities in a blow to Labour’s hopes of attracting major global investors.
Singapore sovereign wealth fund GIC is among a clutch of overseas investors to have concluded that it would not look at opportunities in the UK in the regulated utility sector in the wake of the crisis engulfing Thames Water, Britain’s biggest water company, it can be revealed.
The bruising sentiment was communicated to Steve Reed, the environment secretary, in a private meeting this month in the City offices of “magic circle” law firm Slaughter & May.
Having begun cordially, sources said the meeting quickly became “politely hostile” as investors responsible for managing hundreds of billions of pounds warned that parts of the UK were now uninvestible. One person is understood to have said that “the UK is totally off our radar at the moment” because regulators have become “too unpredictable”.
The revelations will be a blow to Sir Keir Starmer and Rachel Reeves, who are banking on billions of pounds of investment from overseas to deliver on ambitions for growth that are at the heart of their plans to revitalise the economy.
Frustration is growing in Whitehall at a lack of traction from overseas investors in the Labour government’s vision. Jonathan Reynolds, the business secretary, has complained that he is “sick” of the UK losing out to France and Spain. Labour will unveil an “industrial strategy” soon and hope that this will woo global investment from rival nations, he said.
Reed was told in no uncertain terms by major investors that Ofwat’s refusal to allow water companies to increase bills by as much as they want had ramifications for wider investment in regulated utilities. Investors say raising water bills would allow them to upgrade out of date infrastructure, but the regulator is keen to cap price rises for customers and push firms to deliver upgrades more efficiently.
“If this can happen at Ofwat, why should we think that [gas and electricity regulator] Ofgem is safe?” sources said Reed was told.
Abu Dhabi Investment Authority and Australian infrastructure giant Macquarie were among those understood to have sent representatives to the meeting.
Sources close to GIC said that its negativity towards regulated utilities was shared by others in the room. They underlined that GIC remains bullish on other UK investment opportunities.
Others meanwhile said they welcomed the government taking the time to listen to their views. It is understood that such a roundtable of leading investors had not been organised for at least four years.
The government is scrambling to organise a flagship investment summit next month. Sky News reported that fewer than 150 of the 300 companies that ministers had pledged to attract only weeks ago had confirmed attendance. Larry Fink, the head of investment giant BlackRock is set to attend.
With more than $800 billion of total assets, GIC is the world’s seventh-largest sovereign wealth fund, according to the Sovereign Wealth Fund Institute. Some 5 per cent of its investments are in the UK.
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Notable in GIC’s portfolio are London’s Paddington Central that it owns alongside British Land and a 10 per cent shareholding in Heathrow Airport. The fund sold its 17.5 per cent stake in Bluewater shopping centre in Kent for £120 million in July.
A spokesman for GIC said: “GIC established its European headquarters in the UK in 1990. For more than three decades, GIC has been investing in the UK across public and private markets.
“We remain committed to the UK market and will continue to look for investment opportunities that will be good additions to the total global portfolio.”
A Defra spokesperson said: “These were constructive talks about how there are significant investment opportunities in a reformed water sector where our creaking water infrastructure is upgraded and we clean up our rivers, lakes and seas.”