With UK Government finances stretched to record levels as a result of the pandemic, private capital will be vital to achieving the huge levels of investment required to meet long-term strategic ambitions, such as Net Zero and the Levelling-Up agenda. On the eve of COP26, GIIA Policy & Research Executive Estela Bibiloni Diaz analyses how these priorities have been reflected in the Autumn budget …
The budget and spending review announced on 27tOctober has targeted some key infrastructure areas. The Government has committed to investing £21bn on roads, £35bn on railways, and £6.9bn on transport infrastructure in cities outside London as part of the Levelling Up agenda. An additional £1.4bn will go into the establishment of the Global Britain Investment Fund, which will support the development of emerging technology, particularly in the electric vehicle sector, and thus crowd in private investment. An additional £1.7bn will go towards a new UK nuclear plant (widely expected to be Sizewell C).
Additionally, the UK Infrastructure Bank, with its role as a catalyzer of private investment, is off to a great start, having made the first commitment to the development of offshore wind infrastructure in the Tees Valley recently.
However, during the Budget announcement, Chancellor Rishi Sunak also acknowledged that ‘government action won’t be enough to create a stronger economy’ on its own.
As COP26 approaches, this statement builds on the recently released Net-Zero Strategy, which estimates that £90bn in additional private investment will be needed by 2030 if we are to achieve climate change targets. GIIA members are strongly committed to the achievement of the 2050 Net-Zero target and, over the last five years, have invested more than £25bn to new green infrastructure projects to meet the energy transition, on top of £63bn of investments already made.
In all, the Autumn Budget brings us one step closer to our goals in the allocation of public funding, and gives investors a better perspective on the plans of the Government.
What is now needed is a clear statement of intent to investors that the model of economic regulation in the UK will move away from a short-term focus on bill reduction and towards prioritising the investment that is required to meet existing and future challenges, while achieving a fair balance between cost and return.
Investors, therefore, look forward to the publication of the White Paper on Levelling-Up, the Regulation Policy Paper, which will set up the UK’s economic regulation environment for coming years, and the response of the Government to the Better Regulation Framework review.
These announcements, alongside the already published Regulated Asset Base (RAB) model for nuclear, will set out the first steps towards achieving the much-needed clarity that will help unlock the vast sums of long-term patient capital available from infrastructure investors.
GIIA looks forward to continuing working with the UK Government in achieving that regulatory stability and bringing into the conversation the voice of private infrastructure investors, who are keen to play their part in the transition to net zero by 2050.