Analysis: With steel on the brink, 5 ways privatisation has degraded the British economy

Ben Wray

From Steel to North Sea Oil and Royal Mail to water, privatisation has done long-term damage to the British economy

BRITISH Steel, purchased by the firm Greybull in 2016 for £1 is demanding a bailout of £30m from the UK Government to continue functioning, despite having just received a £120 million loan just two weeks ago.

Unions fear around 5000 jobs will be lost immediately, with another 20,000 to go in the supply chain.

The UK Government is refusing to countenance nationalisation of the failing steel industry, despite the bulk of the once sizeable industry having spent a prolonged periods in public hands.

For millions of people, the death of the original British Steel under Margaret Thatcher remains iconic of the use of privatisation to sell-off public assets, decrease democracy in the economic sphere and undermine union power.

We look at five examples of British privatisation and measure the lasting damage.

British Steel

The decline of British Steel is an object lesson in a common feature of privatisation processes – that privatisation itself is often preceded by lengthy periods of run-down, during which public companies lack investment in the face of challenging market conditions.

In 1980 Thatcher began her assault on steel workers, abiding by the logic of the Tories’ ‘Ridley Plan’ strategy, to pick battles in industries and peel off workers in different industries one at a time.

Workers struck at the start of the year to fend off attempts to ‘rationalise’ the industry but by the end of the year several major plants had been cut with the loss of tens of thousands of workers. Between 1979 and 1981 half of steel workers lost their jobs.

Years of this followed before British Steel was finally sold-off in 1988. Still, in its first full year of trading the new company recorded pre-tax profits of £733 million.

From here, British Steel production continued to wither, and with it a major national asset.

North Sea Oil

At just the same time when many advanced economies were establishing lucrative state-owned oil companies, the British state was selling off ours.

Half of the world’s state owned oil companies still extant by the mid 1990s were founded between 1970 and 1982, just as fresh oil fields were being exploited in the North Sea. Even states without their own substantial domestic oil resources, such as Germany and Japan, became more interventionist in securing long term supply arrangements.

The UK was part of this pattern, establishing its own state oil company – Britoil – in 1976. However in 1977 the UK began a fire sale of its oil assets, including the reduction of its position in British Petroleum from 68 to 51 per cent.

Within ten years of this decision all the government’s BP shares were sold, the state had sold all of Britoil’s production operations and ended trading. The British Gas Corporation likewise sold all its assets.

Then, as now, industry experts and academics were scathing of the decision to abandon any sovereignty over an era-defining national asset.

The now very limited tax revenues that could be derived from the massive corporations which hijacked North Sea oil were used by Thatcher to cut taxes and fund expanding unemployment lines. And of course they were used to finance Thatcher’s privatisation programmes. The trillion dollar oil fund established by the UK’s neighbour in Norway, now being used to charge development in green industry, went up in the smoke of Britain’s slash and burn policy.


The privatisation of the water supply in England and Wales was perhaps the most wildly ideological of them all. Of course, water literally falls from the sky, and not at a inconsiderable rate in the UK. Our bodies are 70 per cent water.

And yet this most essential part of our physical environment has been deemed the property of numerous companies since 1989 when it was sold-off.

Since then, water bills across England have soared by 40 per cent above inflation. Since 2010 shareholder dividends have exceeded £13.5 billion in payouts, almost matching pre-tax profits, indicating a pathetic level of investment.

Indeed, England and Wales’ decrepit water infrastructure means that three billion litres of water is wasted every day according to the GMB union, whilst hosepipe bans become more common in the peak of summer.

But much worse is to come. The grossly inefficient privatised system of water distribution will compound the effects of global warming to created what Sir James Bevan, chief executive of the Environment Agency, has called the ‘jaws of death’ – where falling supply meets the growing demand of a growing population.

Eighty-three per cent of citizens of the UK support the public ownership of water.

Royal Mail

Royal Mail privatisation came late in the decades long sell-off of public assets, long after the shine had well and truly come off the project in 2013.

Within three years of this date it had shed 11,000 jobs and closed 5 per cent of its delivery offices, with more cuts following since.

As pressure on remaining workers increased, the priority of the company pivoted to ensuring swollen pay for top executives. In 2018 there was a shareholder revolt when the company announced an annual pay package for chief executive Rico Back of £2.7 million to compliment the £6 million golden hello he received upon joining the company.

Rather than sell Royal Mail to the highest bidder, David Cameron’s government opted to allow financial institutions to set share prices at 330p. Within 24 hours they had leapt to 455p, with many of the banks involved in setting the price cashing in. The public is believed to have lost £1 billion in the sale.

Today the business has all the signs of being run down, as the decline in the volume of mail drags the share price ever down amid profit warnings.

Sixty-five per cent of the public want it brought back into public ownership.


Of course, Carillion wasn’t itself a company in public ownership which then went on to be privatised. But it was the product of the outsourcing of many aspects of public services to private enterprise.

The behemoth – under-regulated and, as it transpired due to monopoly in the auditing industry, lacking in accountability and oversight – was in charge of 420 public sector contracts across an absurd range of functions including road and rail maintenance, facilities management, catering, accommodation, consultancy, and construction when it announced mortal financial difficulties in 2017.

The scandal revealed the extent to which – through a mixture of privatisation, under-investment and austerity as well as the proliferation of private-public funding schemes like PFI under successive governments – the logic of Thatcher’s model had spread throughout the economy, including in nominally public spheres, generating widespread instability.

The final collapse of Carillion saw the company liquidated with total liabilities worth £7 billion, with Chancellor Philip Hammond announcing that there would be no new PFI contracts signed – an ignominious end for a modern privatisation experiment. 

Picture: skeeze 

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