Foreign investment needed to modernise Britain’s ageing energy infrastructure is threatened by rising political and regulatory risks, industry leaders have warned.
The chief executive of National Grid, which manages the country’s electricity and gas infrastructure, said US investors in particular were concerned about a cocktail of uncertainties including Brexit, government intervention in energy pricing and the Labour party’s renationalisation plans.
“US investors are now warning there are too many uncertainties,” John Pettigrew told the Financial Times. “It is important that the UK is seen as a place that is attractive to inward investment. In terms of the energy sector, a lot of infrastructure needs to be built in the UK over the next few years. Post-Brexit, it is important that it is coming in.”
His comments were echoed by the Energy Networks Associations, which represents electricity and gas distributors. It said its members were “very concerned about the response they have seen from US investors” to recent developments in the UK.
“Ultimately, investor uncertainty risks translating into higher costs of capital and so higher costs to British bill-payers,” said a spokesman for the association.
Some of the world’s biggest and most high-profile investors are active in the UK energy sector, including multi-billionaires Warren Buffett and Li Ka-shing.
Mr Buffett’s Berkshire Hathaway of the US owns Northern Powergrid, which distributes electricity in the north-east of England, while Mr Li’s CK Infrastructure Holdings of Hong Kong owns power and gas distribution assets.
Canadian pension funds, Arab and Chinese sovereign wealth funds and Macquarie, the Australian bank, are among other owners of the pipes and wires which deliver energy to UK homes and businesses.
Foreign investors were attracted in the past by Britain’s reputation as one of the most stable and liberal energy markets in Europe but this has been changing.
A clampdown by Theresa May, prime minister, on “rip off” energy bills — including the introduction of legislation last week to impose a cap on the highest tariffs — threatens to curb suppliers’ profits. Investors are worried that this newly interventionist approach could be extended to network charges.
Further uncertainty has been created by Jeremy Corbyn’s promise to renationalise the energy grid if his opposition Labour party is elected to government. “We need a publicly owned grid to act as the great leveller . . . guaranteeing that everyone has access to clean, affordable energy all of the time,” Mr Corbyn said last month.
Mr Pettigrew said there was “no evidence that the large cost and distraction of nationalisation would deliver the stability and long-term investment our energy networks need”.
Brexit is another risk because of potential disruption to the UK’s role in the EU internal energy market, which allows for tariff-free trade in gas and electricity.
Tens of billions of pounds of investment is needed in UK energy infrastructure over coming years to replace ageing coal and nuclear power plants and to strengthen the electricity grid to cope with growing supplies of clean but volatile renewable energy.
Get alerts on UK energy when a new story is published