A recent panel debate discussed why access to money isn’t the problem.
Investment in the UK’s infrastructure needs to rise significantly in the coming decades. Much of this must come from the private sector.
That’s why the ICE’s new Next Steps programme is seeking insight into how the government can engage private investors to meet that need.
As part of this work, the ICE held a panel debate to explore the government’s options.
The panel included:
- Julie Wood, ICE Vice President and director at Mott MacDonald
- Andrew Rose, Enabling Better Infrastructure (EBI) programme steering group member
- Dr Daryl Murphy, managing director and chair of infrastructure debt, private markets at Aviva Investors
- Julia Prescot, deputy chair at the National Infrastructure Commission (NIC)
- James Alexander, chief executive at the UK Sustainable Investment and Finance Association
Panellists highlighted five priorities for the UK government to boost infrastructure investment:
1. Get the foundations right and the money will follow
The UK already uses a lot of investment models compared to most countries.
New models are hard to develop and rarely fix core problems with infrastructure development.
The government’s priority should be to improve the foundations of infrastructure planning and delivery.
The second National Infrastructure Assessment (NIA2) should be the basis for the upcoming infrastructure strategy.
That needs to set clear pathways towards the climate transition and the economy of the future.
Regulation needs to drive investment in energy and water. The planning system must enable faster delivery.
Getting the basics right will boost confidence across the supply chain and investors.
2. There’s money available but too few investable opportunities
The good news is there’s plenty of private capital available. Investors are drawn to the UK, which has strong institutions and has delivered good returns.
So, while the government’s expected pension reforms were welcomed, increasing the available capital won’t fix the UK’s main investment barrier – uncertainty.
Investor confidence in recent years has been weakened by too many policy reversals and a lack of clear, long-term investment opportunities.
The government needs to support its 10-year national infrastructure strategy with delivery plans, setting out investment models, timeframes, and oversight arrangements.
Private capital comes from many different sources. The right money must align to the right opportunities, determined by factors like sector and risk profile.
The infrastructure pipeline can’t be a wish list of projects. It must set out genuine, detailed, investible opportunities to guide and engage the private sector.
3. More discipline and better communication can help
Critics say private finance is more expensive. But it also encourages discipline, which can help deliver projects on time and at lower cost.
Often, public sector projects don’t do enough work early on to freeze designs and costs. Politicians face pressure to get spades in the ground to show progress.
In the private sector, scope, costs, and outcomes must be clear early on. It takes discipline to keep projects within that envelope – developers cannot rely on additional funds being available.
The NIC says better early-stage design and budget work could reduce some project outturn costs by 20 to 40%.
But industry, investors, and government rarely talk the same language or focus together on doing infrastructure better. That needs to change.
4. Learn lessons from abroad, and at home
The UK government should learn from investment approaches abroad but take care to avoid arriving at the wrong conclusions.
While Ireland has used public-private partnerships (PPP) well to build roads, its energy transition has been slow.
Hong Kong and Singapore do a lot well but have very different political systems to the UK.
The UK government can’t offer subsidies at the scale the US has with the Inflation Reduction Act.
That said, investors are actively making comparisons between countries. The government must ensure the UK is a better offer than elsewhere.
The UK already has a lot of infrastructure held in private ownership, perhaps the widest range of investment models used globally. It has plenty of experience in areas like the Private Finance Initiative (PFI).
The government must draw on that knowledge. But comparing the performance of PPPs with public sector delivery is difficult due to evidence gaps.
5. The public ultimately pays – so talk to them
The taxpayer ultimately funds new infrastructure, whether through taxes, utility bills, or user charges.
This should form a virtuous circle where that infrastructure makes society a better place to live and work.
But there needs to much more engagement with the public about why infrastructure is necessary, how it’s paid for, and the trade-offs involved.
The Mutual Investment Model
The Welsh Mutual Investment Model (MIM) is one attempt to bridge that gap. It’s a form of PPP that’s designed to be more transparent.
It has public and private ownership and requires citizen engagement and community benefits.
But there was some scepticism about whether PPPs should be the answer to Britain’s investment challenge.
MIM is mainly being used in social infrastructure, such as schools and hospitals.
Meanwhile, the UK government seems to want the private sector to focus on economic infrastructure, such as transport, energy, and water.
If so, it must act to make those sectors as investable as possible.
We want hear from you
Through its Next Steps programmes, the ICE convenes global public debates to discuss much-needed action on key policy issues affecting civil engineering and society.
The briefing paper provides a starting point for discussion about which models could help the UK government increase private sector investment and deliver the services the public needs.
The ICE wants to hear responses from infrastructure professionals and other experts to the following questions:
- What are the alternative options available that would minimise the requirement for public sector investment?
- How best should private finance be engaged?
- What requirements and/or stipulations for programme management could be mandated by the Treasury to improve cost controls in delivery?
This insight will inform an updated briefing paper to be published in the new year.
Please contact [email protected] to share your views by Friday 6 December.
