Private equity’s hostile takeover of Britain

One-third of every water bill you pay in the UK today goes directly to cover the debts or dividends of private investors, rather than improving services or building new infrastructure. And from 2016 to 2021, the same company, Yorkshire Water, discharged sewage into rivers every 18 minutes. But the most incredible part is that the majority of Britons don't even know that they work for, or receive services from, companies that are no longer publicly owned: one in 25 people is actually working for a company controlled by private equity, and 10% of all wealth generated in the UK now comes from these companies. People tend to think that there is little difference between a large company owned by public investors and one owned by private investors. But according to Hettie O'Brien, the difference is huge—and dangerous. The illusion lies in the name itself: “private equity” seems to suggest investment and growth, but the real driving force is debt. The key mechanism is called a leveraged buyout: the fund buys a company by putting up only 20% of its own money and placing 80% of the debt directly on the acquired company. In essence, the company goes into debt to pay for its own acquisition, and then has to work hard to pay that money back. Managers talk about efficiency and cost cutting, but the real gains come from financial manipulation. Over the past decades, with low interest rates, this scheme has enriched a few and multiplied the number of transactions. Today, with high interest rates, the party seems to be over, but the damage remains. O'Brien reports that many formerly public companies—from daycare centers to nursing homes—have come under the control of private funds, often hidden behind an opaque network of intermediary companies. A prime example is Hilcorp Energy: this little-known private company has emitted 50% more methane than a giant like ExxonMobil, even though it produces much less fuel. However, since it is private, it is almost entirely beyond the reach of public oversight. There is also a human side: O’Brien interviews a union official who explains how the nested-box structure makes it impossible to find out where the money goes and where decisions on minimum wages come from. And while the managers of private companies get rich, it is the citizens who pay the price: fewer rights for workers, deteriorating services, and staff cuts. In Denmark, Kenya, and the United Kingdom, history repeats itself, with devastating consequences for those living in the real economy. And it's not just a national issue: much of the money that fuels this system comes from Gulf sovereign wealth funds, with all the geopolitical weight that entails. A former U.S. Treasury official tells O’Brien: “If one of your most influential economic sectors depends on Saudi money, shouldn’t that be a topic of public discussion?” Here comes the game changer: we think that finance is a game for the rich that only concerns the stock market, but the reality is that private equity mechanisms are now everywhere—and the consequences affect us all, every day, in essential services. Some say the worst is over because interest rates have risen, but the business model is not dead; it has merely adapted and is already finding new avenues, for example in private credit, i.e., credit outside public channels. A question that almost no one asks is: How much control do we still have over the fundamental aspects of collective life, if the real masters are invisible and out of reach? Perhaps the only certainty is the growing anger of those who are directly affected by these effects, as is evident from the pages of the book. The bottom line is this: private equity hasn't just bought companies—it has bought entire chunks of society, and it manages them for itself, not for us. If these stories have made an impact on you because they make you look at your next utility bill or the next public service differently, on Lara Notes you can declare that this perspective is now part of your way of seeing things: it's called I'm In. And if, in a few days, you find yourself telling someone this story about water, debt, or shell corporations, you can go back to Lara Notes and tag the person you were with: Shared Offline is the gesture that puts a stop to that real conversation. All of this comes from New Statesman and has saved you over ten minutes of reading.