29 September 2026
If you are covering the proposed plans around water companies and GB Grid announced by Andy Burnham in his Labour Party Conference speech, please find below a comment on the impact on the industries and listed companies from Phil Ross, equity research analyst at Quilter Cheviot:
"Burnham's speech provides us with some additional details on his administration's plans for the UK Utilities sector, but uncertainty still lingers. Water companies seemingly remain at the top of the new government’s naughty list, with announcements today confirming that change is coming. Unsurprisingly, and in line with numerous recent mentions of increasing 'public control', Burnham has announced that his government will remove the ban on public ownership of water companies. There was also focus on lowering electricity prices in order to remove a 'barrier to growth'. As feared, we didn't get much extra detail, and suspect this will be saved for next month's Budget; shares in all the UK Utility names were modestly in the red at the close of the speech - we think uncertainty is reducing but has not yet vanished, leading some investors to be hesitant.
"State ownership continues to be a meaningful possibility for Thames Water, but there a still a process ongoing whereby the creditors are expected to submit a new plan to the Ofwat/the government in due course. Question marks remain over how the government would fund any state acquisition of the water industry, however, given estimates that equity costs plus required capital expenditure could easily top £200bn - optically challenging at a time when fiscal headroom remains tight. Tactically, the government may decide that nationalising Thames offers better 'bang for buck', and use this as a warning shot for the rest of the sector. Thames' reported debt value sits around the £20bn mark, which is an easier number for the government to navigate, especially if any debt write-downs are in play.
"Electricity companies generally have a better reputation (or at least, less negative) and have done a good job at investing in improving infrastructure to modernise the UK's electricity grid, despite a negative backdrop of elevated electricity prices driven by a high share of gas in the UK's generation mix. This is largely seen as a consequence of repeated short-sighted energy policies, rather than industry shortcomings. Still, the UK does have some of the highest electricity prices in Europe, even if part of this is optical, caused by policy/levy costs included as part of the electricity bill (as opposed to some countries including these via general taxation). Removing 5% VAT is a step in the right direction, but not hugely meaningful.
"Indeed, Burnham, as with his predecessor, wants renewable energy to be central to the UK's energy mix, with Nuclear also getting a shout out. SSE still offers meaningful renewable generation capacity for the UK, despite its recent pivot towards electricity grids, while Centrica is the clear name involved in the UK's Nuclear generation. One uncertainty is how the government will accelerate the de-linking of gas and electricity prices, and whether this means formally re-writing some existing contracts or, more simply, continuing to invest in more renewables generation, and importantly, battery storage, in order to reduce the share of gas in the UK's energy mix, which continues to edge downwards.
"Burnham also wants to improve the electricity grid connection framework with the launch of GB Grid, an apparent competitor to National Grid and SSE, but we see any potential impact as small. The UK already has competition for certain large grid projects with the CATO regulatory framework, so this news isn’t particularly radical. Furthermore, GB Grid’s reported budget is dwarfed by the approximately £70bn in earmarked networks capital expenditure for SSE and National Grid over the next five years. Clearly Burnham wants energy infrastructure to help boost growth, but those listed businesses are going to be crucial if he is to deliver on any of his ambitions within the utilities space."
