Infrastructure ownership and control stock-take
Start date: 14 May 2010
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Purpose of the infrastructure stock-take
Effective infrastructure is a key foundation for strong economic growth. In the past five years an estimated £150 billion has been invested in the economic infrastructure of the UK. The Government anticipates that some £200 billion will be invested over the next five years. Forms of infrastructure ownership have changed markedly in recent years, with infrastructure funds playing an increasingly prominent role.
We launched an infrastructure stock-take in May 2010 with the aims of
- mapping infrastructure ownership and control across the main economic infrastructure sectors - communications, energy, transport, waste and water
- assessing how ownership of infrastructure affects outcomes for consumers in these markets.
We carried out three main pieces of work during the stock-take. First, we mapped infrastructure ownership. Second, we analysed some of the main cross-cutting themes relating to competition in the infrastructure sectors. Finally, we carried out case studies into four areas of infrastructure provision - ports, waste, toll roads and car parks.
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Findings and outcomes
Our mapping of infrastructure ownership covered around 200 companies across the core economic infrastructure sectors. We found that:
- There is high diversity in infrastructure ownership and sources of capital, with UK and foreign public listed companies accounting for the largest share at 42 per cent.
- There is a trend of ownership shifting towards specialist infrastructure funds, and also a trend for ownership to be increasingly internationalised, with many sectors drawing in global investment - at least 38 per cent of UK infrastructure is owned by foreign firms and investors.
- Public ownership makes up around 18 per cent of infrastructure assets, whilst 9 per cent are various forms of not-for-profit structures - typically trusts or companies limited by guarantee.
In our analysis of the impact of the effects of ownership on outcomes in infrastructure markets, we found that:
- The potential for change of ownership through strong capital market competition can place an important discipline on firms and can put downward pressure on costs. In this context, foreign investment can be very positive in strengthening capital market competition.
- The ownership map shows that there is cross-ownership both within and across markets - for example, around 30 per cent of assets are held as part of wider infrastructure groups. There is no evidence that the merger regime is not operating as intended and the OFT has no immediate concerns about overall levels of concentration and cross-ownership within the infrastructure market as a whole.
- Market power exists in many infrastructure sectors, and this can affect outcomes for consumers. The report sets out how we would assess the case for intervention in infrastructure sectors. It highlights the potential risks from intervention including the potential 'chilling' effect on investment where firms have taken commercial risks in establishing their position.
The analysis in the report was informed, in part, by four case studies relating to ports, waste, toll roads and car parks.
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Report
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Related documents
Ownership maps (all Excel spreadsheets)
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Contacts
Team Leader: Chris Jenkins (020 7211 5810, chris.Jenkins@oft.gsi.gov.uk)
Senior Responsible
officer/Project Director: Heather Clayton (020 7211 8826, heather.clayton@oft.gsi.gov.uk)
Any media enquiries should be directed to a member of our Press Office.
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