Office of Fair Trading
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OFT publishes stock-take of infrastructure ownership and control

The OFT has recently published its map of who owns what across the UK's economic infrastructure. The map shows 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
  • around 18 per cent of infrastructure assets are in public ownership, whilst nine per cent are held in various forms of not-for-profit structures - typically trusts or companies limited by guarantee.

The OFT's report also says 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, it says 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.

However, the OFT found that the potential for market power exists in many infrastructure sectors and that this can affect outcomes for consumers. Four case studies - into ports, waste, toll roads and car parks - highlight the importance of considering competition when awarding concessions and procuring infrastructure projects. For example, the case study on the M6 toll road found that the operator is likely to have pricing power, as alternative routes do not provide a strong competitive constraint.

The OFT also sets out in the report how it would assess the case for intervention in infrastructure sectors. It highlights the potential risks of intervention including the potential 'chilling' effect on investment where firms have taken commercial risks in establishing their position. The OFT would be more likely to intervene where there are long-term barriers to entry and where potential competition is being constrained. This should provide more information and improved certainty about the OFT's approach, to the benefit of investors. 

Heather Clayton, Senior Director of OFT's Infrastructure Group said:

'This stock-take pulls together for the first time and in one place information on who owns the UK's economic infrastructure.

It provides clarity and greater certainty to businesses and investors on when we might consider intervening in Infrastructure sectors. Alongside this, our report should have wider benefit to government and other bodies responsible for ensuring competitively provided infrastructure contributes to economic growth.'

The key aims of the stock-take were to map ownership and control across the economic infrastructure sectors such as ports, airports, energy and water networks, assess how ownership of infrastructure affects outcomes for consumers in these markets and examine the different forms of ownership.

Download the infrastructure ownership and control stock-take final report (pdf 1.23 Mb)

NOTES

  1. The OFT launched the stock-take in May 2010. Further information and Q&A is available on the Infrastructure ownership and control stock-take main page
  2. The work was carried out using the OFT's power under Section 5 of the Enterprise Act 2002.