Labour Nationalizations Would Cost U.K. $250 Billion, CBI Says

(Bloomberg) -- Jeremy Corbyn’s promise to take U.K. privatized companies back into public ownership if his Labour Party wins power will cost almost 200 billion pounds ($250 billion), according to the Confederation of British Industry.

In an analysis published Monday, the business lobby said the 196 billion-pound cost of nationalizing the energy, water and rail industries, plus the postal service, will push government debt above 2 trillion pounds to 94% of GDP –- levels not seen since the 1960s.

The proposal to unpick the privatizations that began in the 1980s has hit the market value of companies including Severn Trent Plc and National Grid Plc and raised fears that billions of pounds of debt could be added to an already stretched national balance sheet.

Labour says the cost of the borrowing would be covered by the profits from the industries, though the CBI warned that the confidence of international investors would be “severely hit’’ if Labour refuses to pay full market value, as is widely expected.

“The price tag for Labour’s renationalization plans is beyond eye-watering,’’ said CBI Chief Economist Rain Newton-Smith. “And that’s only the starting point. It doesn’t take into account the maintenance and development of the infrastructure, the trickle down hit to pension pots and savings accounts, or the impact on the country’s public finances.’’

The projection is higher than the 176 billion pounds estimated last year by the Centre for Policy Studies, a right-leaning think tank. The CBI said its calculation is equivalent to the amount of income tax paid by U.K. citizens each year and as much as the health and education budgets combined.

“These figures show how, at a stroke, Jeremy Corbyn would waste the hard work the British people have put in to get our economy back on track,” Business Secretary Andrea Leadsom, from the ruling Conservative Party, said in a statement. “Their reckless plans will damage the economy -- driving up the cost of living, driving down the quality of services and leaving the public to foot the bill.”

--With assistance from Jill Ward.

To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, David Goodman

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