By Isle of Wight Observer
With just a single ice skate and a packet of Tuc biscuits, we waved Mr H happily onto the ferry for his holidays – something fast becoming beyond the reach of many Islanders. Through direct experience or incredulous social media posts, the cost of our ferries is causing serious issues for individuals and businesses.
Firstly, thank you to the staff we interact with at the terminals, on the boats and those making things happen behind the scenes.
They do a great job on not fantastic wages (seeing dancing Jim always cheers me up). Both CEOs are always courteous in our communications.
If I were the owner of the private equity firms (PEFs) that employ them, I’d be over the moon at the amount of money they make for me. For residents and visitors though, it feels like we are being held to ransom. Even the MP, Bob Seely, says Wightlink represents the unacceptable face of capitalism – although he does nothing about it, mind! So why have fares gone up and service levels gone down? The simple answer is private equity, in the case of Wightlink, Basalt Infrastructure Partners and Fiera Infrastructure. These businesses specialise in buying ‘infrastructure’; they’ve figured out we don’t have a choice in using it, and they excel in increasing prices and reducing service in exchange for fantastical returns.
The CEO of Wightlink tells us they don’t make a profit, so stop moaning. On paper, he’s right. So, why would anyone pay around £250m for a business that loses money? It seems a daft idea to me. Well, this is where the PEFs start to work their financial wizardry. So how do they do it?
Well, first of all, through the five companies set up by the PEF to control Wightlink (Red Funnel’s structure is also not easily understood by non-financial experts), they load around £300 million of debt into WL, then move the money around between the five companies – like a game of find the lady. WL, or more importantly us, as customers through the fares we pay, fund the interest on this debt at 9.25 per cent a year (yes, that is very high; unethical, but not illegal). This reduces WL profits, in 2018 it was £16.6m and £14.5m was paid out in dividends to the holding companies. It’s all getting a bit clearer, isn’t it? In 2021/’22 the profit was £14m on a turnover of £71m; they paid a dividend of £8m. But the holding companies moved the money around to make a £22m loss, to avoid paying tax. You are allowed to feel dizzy at this point. So, what the CEO says about not making a profit isn’t that straightforward, as someone somewhere is making a lot of money, yet not a lot of tax is being paid.
From 2017, WL has paid £4.62m in tax but claimed £6.82m in rebates. You and I can’t do that. The average net profit is 20.4 per cent, a fantastic return, especially when compared to regulated rail travel which is capped at 4 to 6 per cent with minimum service level requirements too.
All this looks like an intractable problem, but it is one that needs resolving if levelling up is to mean anything at all. Groups like the Wightlink Users Group are putting pressure on, but there are only two options to resolve the issue. The first option is regulation, with capped profits and minimum service levels. That would devalue the companies, which in turn means the other option – legislation to take the ferries into public ownership (nationalisation) becomes more possible.
One thing is clear, if we just accept this as ‘our lot’, rather than being levelled up, we will just become cash machines for private equity firms that care not a jot for us.
