Private equity and the regulation of financialised infrastructure: the case of Macquarie in Britain's water and energy networks

This paper explores the ways that private equity practices of financialised value extraction have migrated to the water sector in England. In line with the financialisation literature more broadly, we show how private equity investors have found innovative financial mechanisms for increasing investor returns that are unrelated to productive activity. The resulting financialised, highly-indebted corporate structures create costs and risks for utilities which raise concerns for social equity. The regulatory response to these financial innovations has been slow and had limited effect. The regulatory toolbox, governed by a narrative of competition, has consistently been biased towards investors and misses much of the scope of financialised corporate extraction. A review of the activities of a major private equity investor, Macquarie, active across numerous infrastructure sectors in the UK, illustrates the dynamic way in which infrastructure funds are moved across investments and sectors in ways that can escape regulatory processes and increase investor returns. The paper shows how the regulator is caught in an impossible bind in meeting the contradictory and contested interests of investors, end users and the state such that we question whether the socially equitable regulation of financialised infrastructure can ever be possible.