Halfway through this Parliament, sentiment towards the UK has shown signs of positive improvement but investors need to see more focus and consistency if the UK is to draw in crucial investment the country’s core infrastructure – spanning green energy, through to airport improvements and the current data centre wave.
The Global Infrastructure Investor Association’s (GIIA) latest Pulse Survey of its membership – comprising some of the biggest investors globally – shows that despite a continued rebound in attractiveness since an all-time low in late 2022, the UK still has a way to go in creating the right environment for investment.
The investment barriers which GIIA members indicate are standing in the way of deploying even more capital in the country, include a rise in political instability and the current state of the UK’s regulatory regime.
The survey results come as members were polled just ahead of the UK local elections, which have since shaken the country’s political landscape and shattered it’s previous two-party dominance.
Regulatory concerns are also slowly rising even as the Labour Government makes positive progress towards much needed reform in the water sector – a priority also set out in the King’s Speech this week alongside wider intentions to accelerate world class infrastructure in the UK. This includes the recent appointment of the Chair of Transition, who will drive the water reform process forward.
Positively, GIIA’s Pulse Survey does highlight a strong pipeline of deals in regulated gas and electricity, including a record investment tabled in UK Power Networks of more than £15 billion. Investors also indicate confidence in data centre, digital, rail rolling stock, and the country’s best-in-class offshore wind sector.
The remaining question is whether the UK Government can support this pipeline and investment appetite with policy execution. That much of the deal pipeline remains ‘early stage’ means it is not a foregone conclusion that all pending deals will close.
When combined with the UK’s macro-economic outlook – remaining exposed to the Iran war, energy supply risks, and receiving the largest IMF downgrade of all G7 countries – now is the time for the government to reassure investors the UK is the right place to invest and to ‘double-down’ on the promised growth strategy.
Jon Phillips, Chief Executive of GIIA, said:
“It’s positive to see the government taking the right steps to address the big issues facing UK water and utilities, with a slow upwards trajectory in investor sentiment. However, despite goodwill built up through the Cunliffe report, abolition of Ofwat, and recent appointment of the water sector Transition Chair, members are clear that this may fade if not backed up by policy execution.
“The UK’s healthy early-stage deal pipeline will also only be realized with stable policy and predictable regulation. As political instability trends upwards, the government needs to send the right signals to investors. Getting this right isn’t just about capital, it’s about attracting the capital that keeps the lights on, connecting homes and businesses to clean power, improving public services and transport, and supporting skilled jobs and growth across the country.”
“The opportunity hasn’t disappeared for America, which remains the biggest global investment market with trillions poised and ready to be deployed. But capital is currently having to be deployed selectively, with investors increasingly turning their focus towards state level, where policy is evolving even amidst federal level challenges and gridlock. It’s promising that local appetite exists, including for public private partnership, which provides a real chance to build a stronger America for future generations.
For context, GIIA members as a whole represent over £1.6 trillion of infrastructure investment. With approximately a third of the more than 2,800 assets head globally located in the UK, they also hold rich expertise of financing, operating, and maintaining infrastructure in every sector.
Assets
Survey methodology
The Global Infrastructure Investor Association (GIIA) has run its Pulse Survey in collaboration with infrastructure advisors Alvarez & Marsal on a six-monthly basis since 2020 to understand the sentiment of investors towards the environment for fundraising, the outlook and prospects for markets and industry sectors, the impact of barriers to investment, and emerging investment trends.
Investor members of GIIA respond to an online survey that contains a series of closed-ended questions. Interviews are also conducted with selected respondents to secure additional qualitative, which further build a picture of the investor mood. This edition of the GIIA Pulse Survey was completed with 28 total survey responses – representing a combined infrastructure assets under management of $1 trillion. All individual responses and involvement remain anonymized for commercial reasons.
About the Global Infrastructure Investor Association (GIIA)
GIIA unifies the strength of the world’s leading infrastructure investors and advisors into one powerful, global voice. Since launch in 2016, it has grown from 19 founding organisations to nearly 140 members, representing over $2.2 trillion of infrastructure assets under management across 68 countries.
GIIA helps governments and policymakers worldwide to create the policy and regulatory frameworks that lead to attractive investment environments, enabling the private sector to deploy capital and expertise to deliver infrastructure projects that meet public needs and expectations. Reducing obstacles to P3s and private ownership of infrastructure means governments’ plans for modernisation, operation and maintenance can more readily be achieved.