The government is doing little to encourage the private sector to invest immediately in its National Infrastructure Plan, although plenty of equity capital is available, say specialists in the sector.
Paul Severs, a partner at Berwin Leighton Paisner, a law firm, which last week published a report on British and global infrastructure, says “there isn’t much the government can do in the short term” to encourage the private sector to invest. Eventually, Severs says, the government is likely to have to sell infrastructure assets to the private sector to raise funds for further development. However, he adds, it could use measures such as tax breaks, infrastructure bonds and sensible deregulation to attract investors in the longer term.
David Rose, the chief executive of Equility Capital, alternative capital advisers, also voiced concerns about the government’s short-term strategy, describing the British approach to funding as “Jurassic”. (article continues below)
Because of its commitment to a AAA rating, Rose says, the government could leverage billions of pounds of cheap funding immediately without having to borrow itself. He says the AAA rating would simply provide a guarantee to direct private investors in infrastructure. Rose is writing to Lord Sassoon, who is overseeing the National Infrastructure Plan, to illustrate the demand for direct and immediate investment in the sector.
Overall, prospects for private investment in British infrastructure appear mixed, according to the Berwin Leighton Paisner report, although the government has acknowledged it is vital to delivering economic growth. Of the 130 global infrastructure experts surveyed by the firm, 43% say prospects for British infrastructure projects have worsened since 2007, the year the credit crisis began.
The view compares unfavourably with the global picture, which two thirds of respondents feel has improved since 2008.
However, Britain is still seen as the most attractive country for investment, followed closely by America, China, India and western Europe.