This blog was written by Ros Jackson.
In the third interview of the Perspectives on Infrastructure series, Burges Salmon spoke to Investec’s Adam Gordon about the barriers to private investment in UK infrastructure.
Adam, who is Principal Developments MD at Investec, highlights the institutional barriers that his current joint venture project has faced in funding a new mainline railway station and commercial development in Cardiff. He notes that supply chains in the rail industry are set up to provide services to Network Rail but there are procedural differences for a private sector scheme that have to be worked through as private sector funding is not common practice.
Adam recognises the opportunities for infrastructure of private funding:
“Private sector capital would multiply the resources for infrastructure development, so the government should develop a clear revenue framework and delivery model to encourage the private sector.”
Private investment in infrastructure by pension schemes is currently on the Government’s agenda. The Government is encouraging pension schemes to diversify their investments in its live consultation on improving outcomes in DC Schemes. The Government believes that by encouraging consolidation of smaller pension schemes, these schemes can invest in longer-term, illiquid investments increasing funding of important sectors like infrastructure and green infrastructure. The Government also believes that consolidation of smaller DC pension schemes will not only lead to improved governance generally but will also offer their members greater opportunities to invest in more diverse products, notably longer-term illiquid investments like infrastructure.
Pensions Minister Guy Opperman said that the Government wants to “encourage scale and innovation by pension schemes, and help drive new investment in important sectors of the economy”.
Perhaps this focus on infrastructure investment will lead to the clearer opportunities that Adam calls for. We await the outcome of the consultation, which closed on 30 October 2020.
Private sector capital would multiply the resources for infrastructure development, so the government should develop a clear revenue framework and delivery model to encourage the private sector.