Over the next decade or so, China will invest around £105 billion (€134 billion; $169 billion) in UK infrastructure, according to a new report from law firm Pinsent Masons and the Centre for Economics and Business Research (CEBR).
The report – entitled “China invests West: Can Chinese investment be a game-changer for UK infrastructure?” – predicts that the UK’s energy sector will receive around £43.5 billion in Chinese investment by 2025, while real estate will receive £36 billion and transport £19 billion.
Energy sector investments are expected go into projects including nuclear energy, wind power generation and solar photovoltaic power generation.
The report says it expects to see a “clear rise” in the number of joint ventures between UK and Chinese firms. These have already been seen in the real estate sector, for example at developments in Royal Albert Docks in East London and at Nine Elms in Battersea.
The coming together of Chinese capital with UK infrastructure would potentially be a classic case of supply meeting demand. While Chinese savings are expected to reach $12 trillion in the next decade – more than 30 percent of global savings – “chronic under-investment” has resulted in a UK infrastructure need of almost £500 billion.
However, the report notes that most of the predicted investment may come in the latter part of the 2014-2025 period. This is particularly true of transport where “no immediate flow” is expected due to complications around public ownership, planning policy, funding mechanisms and investment returns. In energy, too, investment is expected to pick up pace towards 2025.
The report also points to the development of a Chinese supply chain into the UK as China uses its “vast domestic manufacturing capability and capacity” to export equipment and materials for those infrastructure projects where it is providing investment.
“Although the flow of investment from China has already started, we expect this to be the beginning of a major trend as a trickle of major Chinese investment turns into a wave over the coming decade,” said Richard Laudy, head of infrastructure at Pinsent Masons, in a statement.