ONE of Scotland's leading corporate financiers has called for Scottish Water to be privatised as part of an effort to stimulate economic growth north of the Border.
Frank Malcolm, head of corporate broking at stockbrokers Bell Lawrie White, said floating the utility on the stock market would generate wealth and work in the private sector and might inspire some of Scotland's biggest private companies to consider
listing.
An IPO would also allow the utility to raise funds to spend on improving infrastructure.
Control of Scottish Water, which supplies 2.2 million people and 130,000 businesses, is devolved to the Scottish Parliament.
Legislation would have to be passed to privatise the utility. But reports have suggested that the Chancellor, Gordon Brown, is looking at public assets which could be sold to the private sector to raise funds, and has identified Scottish Water, one of a handful of large nationalised businesses remaining in Britain, as a target.
The privatisation of QinetiQ, the government's defence laboratories, for £1.3bn earlier this year, has displayed Brown's appetite for selling public assets, Malcolm said.
"There's no question as to whether Scottish Water should be in the public sector, when [water companies] are in the private sector elsewhere," he said.
"You have got to go back to the spending review in December, when the Chancellor said he was going to raise billions per annum. He started with QinetiQ, and Royal Mail may follow.
"I don't see why public services should not be part of that process.
"Severn Trent has a capitalisation of £4bn and deals with a much larger area. Scottish Water will have bigger assets and more surplus water and would be able to raise development capital if it was going to develop its systems.
"We are talking [about a float price of] well into the billions."
Malcolm said the number of quoted companies based north of the Border has fallen after takeovers or de-listings in recent years and he is concerned that not enough private companies want to replace them.
Scottish Radio Holdings, Belhaven Breweries and Glenmorangie have been taken over in the last 12 months alone.
Malcolm said: "When consolidation goes on, there's still a flow of companies coming in at the bottom. [But] very few of these companies are Scottish. That's the concern I have."
Private sector companies which are flotation prospects include 'the usual suspects' such as Walkers Shortbread and food group Baxters.
Malcolm added: "There's still a few private whisky companies. Diageo might well break itself up.
"Lloyds TSB may seek to get out of Scottish Widows - there's all sorts of rumours [about that]."
Malcolm is not the first senior figure in Scotland to call for Scottish Water to be privatised.
John Blundell, director general of the Institute of Economic Affairs, also recently put the case for the privatisation of Scottish Water.
A Scottish Executive spokesperson said: "The Executive's position is clear. Scottish Water remains in the public sector. It's for the Scottish Parliament to decide otherwise."
