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Kind words on UK infrastructure must be matched by action

Writing in Raconteur's latest Future of Infrastructure report for the Times, Our CEO Jon Phillips sets out investor priorities for the Spring Statement.

“We are not hanging around on this,” Chancellor Jeremy Hunt told business leaders at the end of last month in response to questions about the successful implementation of investment incentives in the US. “We recognise that it is creating challenges. We don’t agree with every aspect of it, but nor do we have any doubt at all in our ability to compete.”

As Hunt and his team rehearse for today’s Spring Statement, they’ll be conscious that it’s not just across the pond that competition is hotting up to attract investment in the renewable energy, transport and digital networks needed to make net-zero carbon emissions a reality. Across the channel too, the EU is developing a Green Deal Industrial Plan, one which involves accelerating permissions processes for sustainable projects, streamlining access to EU financing and developing incentives for investors in green projects.

Given that context, it’s encouraging to hear UK ministers say that they are committed to action. There’s certainly work to do.

Every six months, we test investor sentiment among our members, who have a collective $1.3tn in infrastructure assets under management globally, to gauge their appetite for investing in different markets. Over the course of last year, the UK went from being the most appealing western European destination to the least.

The rankings came in around the same time that major forecasters were predicting growth for all the world’s major economies apart from the UK. One major contributor to the gloom: a lack of infrastructure investment.

What a difference six months makes, at least where the forecasts are concerned. The sense now is that the UK could narrowly avoid a recession this year, inflation could fall to close to 2% by year-end (significantly bringing down project delivery costs), and the public finances are better off than expected, to the tune of £30bn. 

Those shifts, combined with the government’s commitments to reform, could see the UK move back up the investor sentiment league table. But only if words are matched by action.

Hunt is right to say that hanging around is not an option when it comes to reform of our regulatory and investment incentive landscape. Only by doing so can we hope to attract the financing needed to modernise our transport networks, digitally connect our communities and hit our renewable energy targets. 

The Chancellor has also promised to respond to Chris Skidmore’s Net Zero Review over the coming months. This comprehensive study is a treasure trove of recommendations which, if enacted, would accelerate inward investment into the UK. From streamlining our planning processes to increase solar and onshore wind delivery, to developing a cross-sectoral infrastructure strategy and even homing in on the importance of biodiversity, Skidmore leaves no stone unturned when considering the interventions needed to make our net-zero goals attainable.

While the study puts forward several helpful new measures which could improve investor sentiment towards the UK, it’s important to flag that addressing existing measures which currently disincentivise investment is also a must. These include the 45% tax on renewable electricity generators – a levy which is, in practice, far more punitive than the so-called ‘windfall tax’ on fossil fuel companies. 

At a more fundamental level, as Andrew Jones, chair of the all-party parliamentary group on infrastructure, set out on our podcast recently, we need to develop a much more sophisticated, long-term approach to bringing private and public financing together to deliver infrastructure, to the benefit of communities and savers alike. 

We look forward to a strong statement of intent from the government today. And then, what we truly need to get the UK economy back on course is the turning of kind words on infrastructure investment into action.

This article originally appeared in Raconteur's Future of Infrastructure report in the Times.