We’ve all seen the thousands of potholes and miles of cracked Tarmac left by the winter across the UK, and, by May, all too few of them have received any highway maintenance TLC. But that’s just the roads, and the Confederation of British Industry (CBI) has published a report calling for the government to enhance the credit rating of its construction schemes to attract more private investment.
Pointing specifically at pooling pension funds and creating a ‘single, attractive shop window’ for schemes, as well as making sure that Solvency II doesn’t ward off any would-be investors, the report claims that the £250bn required by the government’s National Infrastructure Plan will have to come largely from the private sector.
The CBI’s director general, John Cridland, said: ‘By underpinning and lifting the credit rating of certain infrastructure assets, it can make them less risky and more attractive to investors.’ He also said that ‘just a fraction’ of the £1.5 trillion held in UK pension funds would make a ‘huge contribution’ to renewing the country’s infrastructure.
While hunting for more government investment looks like a road to nowhere, the response from pension funds actually looks positive. Responding to the CBI’s report, the National Association of Pension Funds (NAPF) nominally offered support to the CBI’s proposals. Joanne Segars, chief executive of the NAPF, said: ‘Britain’s infrastructure is becoming an embarrassment and a bottleneck, and it desperately needs a revamp. Pension fund money could be a key part of any solution. Big construction projects would boost the ailing economy, and also offer pension funds the long-term, inflation-linked returns they are hunting for.’
That’s a good result for the CBI, but the missing link will be whether the government can overcome inevitable bureaucratic inertia and get the wheels turning. An example of just how slow the process of getting infrastructure projects off the ground is High Speed Rail 2, which has been bogged down in discussions and consultations for the best part of a decade. A spade is yet to break the earth on this project – to the relief of those whose homes lie on the proposed route.
While the government continues to rein in public spending, the level of infrastructure investment needed will almost certainly have to come from the private sector. But whether or not pension funds are won over by minimal government backing to heavy projects is another question altogether…