The timing was probably unintentional. The UK Infrastructure Policy and Investment Summit, which took place in London in April, was supposed to have coincided with St George’s Day.
However, in a move with which UK infrastructure investors and observers of the Brexit process are by now familiar, the Anglican church delayed its celebrations of England’s patron saint until the following Monday in order to avoid a clash with Easter week.
As well as delays, the overarching themes of policy and investment uncertainty in both infrastructure and Brexit remain. And that uncertainty has increased over the past 12 months.
At last year’s summit, junior Treasury minister Robert Jenrick told attendees that the UK’s Conservative government would continue to use the PF2 model, but only “wisely, where it’s clearly in the interest of the taxpayer”. Seven months later, his boss, Chancellor of the Exchequer Philip Hammond, had dispensed with the model, stating that the system did not deliver value for the taxpayer or transfer sufficient risk to the private sector.
So what did the government say this year? Nothing, as it turned out. As Andy Rose, chair of the conference and chief executive of the Global Infrastructure Investors’ Association, remarked during the event: “Brexit has been very distracting for UK infrastructure. We don’t have any ministers at today’s conference. It’s a difficult time for them to come out and talk about these issues.”
No overall control
Without direction from the government, industry leaders were left to talk among themselves about what might be the way forward. After all, when scrapping PFI last year, Hammond maintained that “the private sector will retain a significant role in financing UK infrastructure”.
For what it’s worth, business secretary Greg Clark promised the industry in January that the government would publish its assessment of the use of the regulated asset base model for new nuclear projects by summer at the latest. The model, which has been used in the utilities sector and for the greenfield Thames Tideway ‘super sewer’, could help to attract investors that would otherwise be unlikely or unable to invest in nuclear power.
Yet RAB is not the answer to every question. If anything, it’s a dated answer to a dated question. Critics of the Thames Tideway model, for example, would say a structure that allows investors to gain returns via consumer bills before construction is complete illustrates the kind of risk imbalance that gives private infrastructure investment a bad name.
Darryl Murphy, head of infrastructure debt at Aviva Investors, told summit attendees: “The next 20 years of infrastructure will be very different to the last 20. Some models may not be suitable.”
Although the UK government wants to reset the way private investment in infrastructure is done, it remains unclear on how to go about doing so. But if it wants to be the one to push the reset button, it has to be at the forefront of what comes next instead of being missing in action.
As Murphy and Meridiam’s chief strategy officer Julia Prescott suggested, the government needs to be more investor-friendly. It also needs to provide development capital – beyond the minority equity stakes that made PF2 a laughable replica of its predecessor – if it wants to carve out a new role for the private sector.
A meaningful compromise that provided returns to investors, a significant role for government and fair value for taxpayers and consumers would also help quell the endless public-versus-private debate – a fire being stoked by the nationalisation-hungry opposition Labour Party.
As KPMG’s vice-chairman James Stewart noted at the summit: “I don’t think we have any evidence to counteract the nationalisation alternative. New models need to emerge. We’ve got to do better at getting evidence and substantiating what we’re doing.”
For that, the industry desperately needs the government to show up for work.
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