Letter: Forget water, it’s private equity that needs reform

Your call for a “proper accounting” at Thames Water and its peers (“Thames Water/hosepipe ban: it’s raining cash”, Lex, August 24) resonates loudly. You are right to observe that it is now hard for anyone but a financial expert to work out something as basic as how much cash shareholders have extracted from this key piece of British national infrastructure.

When the financial newspaper of record points this out, policymakers should be asking themselves serious questions about what they have allowed to happen. Among other things they have clearly forgotten how much trust matters in a market economy.

It is hard for people to trust something they do not understand.

Yet while your call resonates loudly, it is also too narrow. That is because what you say about the water sector applies more broadly to the entire private equity sector. Private equity is so opaque that it makes the water sector look like a model of clarity and transparency.

Private equity has grown exponentially over the past 40 years. Policymakers have stood by and allowed an ever-increasing proportion of the economy to become essentially invisible and unaccountable, except to a very small circle of private equity insiders. Private equity is the water sector writ (very) large.

Private equity performs a useful function in the economy, but that does not mean policymakers have to allow it to operate essentially in secret. Being more open and more accountable would not stop private equity doing the useful things it does. Policymakers need to recognize that private equity is in even greater need of a “proper accounting” than the water sector is.

Peter Morris
London N5, UK

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