As many as seven in 10 infrastructure investors in the UK have been deterred from projects due to political concerns, a report from law firm DLA Piper has found.
While investor sentiment was broadly positive on the country, with more than two-thirds expecting net returns to increase over the next 10 years, DLA Piper’s survey of 50 pension funds, life insurance companies, asset management groups and sovereign wealth funds found significant concerns surrounding over-politicisation of the market.
About 84 percent responded that infrastructure project proposals from the UK government have become too politicised, with 55 percent believing this has a direct effect on the value for money of projects. As a result, seven in 10 responded they have been dissuaded from some investments.
Investors told the survey that changing priorities for projects from successive UK governments have generated “major frustrations”, with 38 percent believing the government should accept more completion risk in longer-term projects.
“Whilst the infrastructure need remains high, the UK infrastructure market is at a crossroads,” Darryl Murphy, head of infrastructure debt at Aviva Investors, told the report.
“A loss of trust between the public and private sector; the decline of the UK construction sector; loss of confidence in the PPP model; the threat of nationalisation, all loom large. It is important that the private and the public sectors find a way to work more effectively going forward.”
Investors told DLA that regulation was not a significant barrier to investment but saw the impending withdrawal from the European Union as an opportunity to relax procurement rules, with 88 percent calling for such a change. Energy and transport projects were significantly preferred sectors for investments, according to the report.
The broad outlook was largely positive, with 84 percent saying they expected their funds to invest either at the same levels or more over the next five years in the country, although Colin Wilson, partner at DLA Piper, warned this is “a watershed moment” for the sector to capitalise on both public and private sector willingness to fund and improve infrastructure.