The truth about infrastructure: investors need a return
The government is set to unveil it’s 10-year infrastructure strategy. To make it a success, they must dial down the negative rhetoric – especially when it comes to water, says Jon Phillips
The government has placed private investment at the heart of its growth mission. So, today’s 10-year infrastructure strategy – setting out the country’s colossal infrastructure financing needs – is inextricably linked to building investor confidence in the UK.
As the trade body representing the world’s largest institutional investors managing over $2 trillion in global infrastructure assets, the Global Infrastructure Investor Association (GIIA) has consistently called for a clear, long-term policy framework. The forthcoming strategy is therefore a critical opportunity to provide investors with the confidence they need to commit long-term capital.
The scale of the challenge to renew and future-proof the UK’s critical infrastructure is eye-watering: the government’s own figures show investment needs of £100bn for water, £250bn in renewable energy and £75bn on electricity transmission upgrades over the next five years – to name just three sectors. There is much riding on how the government intends to make the UK a competitive place to attract this scale of international capital.
Credit where it’s due. The government has moved with speed to push through the Planning Bill to accelerate project approvals. Work is also underway to streamline grid access for the queue of renewable investments, and regulators have been tasked with shifting to a more pro-growth agenda.
How to save the water sector
The government inherited a mess in the water sector and moved swiftly to set up the independent review of water regulation. It didn’t take long to identify failures in government direction, as well as dysfunctional regulation, as major contributors to the challenges the sector now faces. With more than 30 UK and overseas investors holding stakes in water companies, a reset to restore investor confidence is long overdue in order to fund the turnaround the sector needs. It’s time for the government to dial down the negative rhetoric on water and dial up the attractiveness of the UK as an investment destination.
This will require courageous leadership because there is a fundamental but inconvenient truth to be acknowledged: investors need to make a return. At least 12 million pension savers across the country are the beneficiaries of investments in UK infrastructure, including social workers, firefighters and shop assistants.
It’s time for the government to dial down the negative rhetoric on water and dial up the attractiveness of the UK as an investment destination.
This will require courageous leadership because there is a fundamental but inconvenient truth to be acknowledged: investors need to make a return. At least 12 million pension savers across the country are the beneficiaries of investments in UK infrastructure
GIIA’s regular investor surveys show sentiment has cooled over recent years, with the UK falling well behind other markets. The new strategy has the potential to re-establish the country as a leader in a global race for capital. It could be a turning point, if it is embedded properly across government, with a pro-growth ‘golden thread’ running through departments and regulators.
Further, attracting investment – particularly for greenfield infrastructure – depends on the right procurement models, risk-sharing mechanisms and funding structures being in place. The government must broaden its financing toolkit, to attract a wider range of institutional investors.
A transparent pipeline of projects – free from the stop-start cycles of the past – is crucial to building market confidence.
The new 10-Year Strategy is a golden opportunity to send a clear signal to global investors that the UK is serious about infrastructure once again. It must provide the roadmap for policy makers, regulators and investors to modernise infrastructure, drive economic growth, and deliver on net zero.
Jon Phillips is chief executive of the Global Infrastructure Investor Association