When the time comes for the UK to move forward with an infrastructure strategy, will it be New Deal or No Deal?
We won’t know for sure until autumn 2020 when the delayed National Infrastructure Strategy will be published and we find out how UK Prime Minister Boris Johnson will finance his “build, build, build” scheme. What we do know is that the scope of infrastructure planning goes beyond the £5 billion that made the headlines.
For example, when the National Infrastructure Commission (NIC) published the National Infrastructure Assessment (NIA) nearly two years ago, recommendations included £43 billion alone just for transport investment in city regions.
Other significant and now highly topical recommendations included nationwide full broadband by 2033—similar to other schemes in Europe, such as France Très Haut Débit which requires €20 billion funding, of which at least €6bn was earmarked to be financed through the private sector.
Another recommendation was for half of the UK’s power to be provided by renewables by 2030—not as ambitious as Sweden’s goal to eliminate fossil fuels from electricity generation by 2040, but still a significant opportunity for participants in EDHECInfra’s TICCS IC70 class (power generation and transmission companies using wind, solar, hydra and other renewables, as well as energy storage companies).
In addition, the government had already earmarked around half of the £640 billion five-year infrastructure spend to be delivered through the private sector.
The question shouldn’t be about whether or not the “innovators” and “capitalists” will have a seat. To wit, as Johnson said in his recent speech about the economy, "In the end, it's their willingness to take risks with their own money that will be crucial for our future success."
The real question is what form the Public Private Partnerships will take, replacing the now grounded Private Finance 2.
Contract for Differences will presumably continue to play a role for energy, including renewables, such as Dogger Bank Wind Farms. And likewise, there may be more acceptance of Regulated Asset Base for greenfield assets, given that, first, investors earn a return on the accumulated capex attracted during construction, and second, that they sit well with Engineering, Procurement, Construction Management (EPCM) procurement arrangements.
If a new model is to be introduced, the smart money might be on something that resembles the Mutual Investment Model in Wales or the Scottish Hub Programme.
And, given how the evolving tax landscape lends weight towards sole jurisdiction investment vehicles, established in territories where the actual work is produced, it would be opportune if this was tied in with the adoption of the proposed UK Professional Investor Fund as a tax-efficient way to deliver on the projects. However, fund structure and duration warrants a whole topic to itself.
Whichever investment, financing and funding models prevail, SS&C is perfectly placed to support every stage of the process, from virtual data rooms for fundraising; data management, analytics and reporting tools; industry-leading, proprietary fund administration platforms, and best-in-breed global process management technology. Learn more about how SS&C can support your infrastructure fund.
Alternative Investments, EMEA