Transforming UK infrastructure will require a level of capital investment that occurs once in a generation. Beyond simply replacing outdated buildings and systems, there’s an urgent need to modernise transport networks, communication infrastructure (5G, high speed fibre broadband and etc) to usher in the new digital era, the energy grid and climate adaption strategies.
The enormity of this task is significant. As Vanessa Havard-Williams, Chair of the Transition Market Finance Review, said “The industrial revolution needed to deliver the energy transition is a one in two-hundred-year event.” But with the challenges comes investment opportunities.
In this Q&A, Phil Kent, Investment Adviser to GCP Infrastructure Investments Limited, discusses how the government is looking to support infrastructure investments, and how private investors have a huge part to play in the infrastructure revolution.
Why is investing in infrastructure a top priority right now?
Covid-19, Russia’s invasion of Ukraine, and recent geopolitical tension has propelled the urgency to update and secure UK infrastructure. It is now at a critical juncture. We need unprecedented investment to replace aging buildings, modernise networks, and tackle the urgent challenges of climate change. If we are going to meet the decarbonisation goals by 2030 and 2050, we need a 5-fold increase in investment in our infrastructure. It’s a massive, once-in-a-century opportunity to transform our economy and move toward a sustainable future. For investors, that means major opportunities in infrastructure assets.
What commitments has the Labour government made to infrastructure?
The energy transition and net zero are at the top of the Labour government’s agenda, second only to economic growth. At the recent International Investment Summit, Prime Minister Keir Starmer emphasised a commitment to reform, securing £63 billion in funding to boost projects in renewable energy, technology, and infrastructure. He’s also pushing to eliminate regulatory barriers that have held projects back, calling it a plan to cut the “anti-growth” red tape. Labour also aims to make the UK a “clean energy superpower.” By investing in renewable energy sources like hydrogen and offshore wind, we’re moving toward a future where all UK energy is generated renewably.
What specific projects are being funded?
The UK has a well-established framework to encourage the build-out of renewable energy through the Contract for Difference Auction. This model has been successfully adopted in other economies, and its effectiveness has already led the Labour government to increase the auction budget as one of its first actions.
In its first Autumn Budget, Chancellor Reeves then reiterated the government’s commitment to infrastructure and made a number of announcements. There was £5 billion for new housing, £1.4 billion for schools, and £1.2 billion for prison services. There was also a strong focus on clean energy, with £8 billion allocated to carbon capture and green hydrogen initiatives. Other key projects include developing the Sizewell C nuclear plant, investing in EV charging infrastructure, and expanding broadband access. Additionally, the government is reforming policies to fast-track projects that will enhance connectivity and energy capacity.
Are these investments enough to meet the UK’s decarbonisation targets?
While the intentions and implied direction of travel are laudable, I think they fall short of what’s needed. They simply don’t meet the massive scale needed for the UK’s climate and energy goals. For example, £125m for GB Energy is small when compared with the c. £65bn needed to deliver on the 140 GW of installed renewable capacity (up from c. 57 GW) committed to as part of Labour’s manifesto. To achieve net-zero emissions by 2050, we’ll need roughly £50 billion in investment every year. We need the support mechanisms in place quickly, so that we can accelerate investment and make promises become reality.
How will the private sector fit into this infrastructure revolution?
The private sector is set to play a huge role. Labour referred to mobilising £3 in private capital for every £1 of public sector capital from the National Wealth Fund, that now incorporates the UK Infrastructure Bank. This collaboration is essential, as public funding alone won’t meet the country’s goals. Once enabling factors like regulatory reform and revenue support models are in place, private investors will have the stability and confidence needed to fuel this infrastructure transformation.
Is there a plan to support these infrastructure goals long-term?
Yes, there’s a 10-year infrastructure strategy and a 2030 Clean Power Action Plan expected in spring 2025. These plans will outline how the government intends to support projects over the next decade, providing much-needed clarity that can help drive further private investment. By laying out the long-term vision, the government aims to keep investors confident and committed. With strong governmental backing and private sector interest, 2025 could be the start of a transformative period in infrastructure investment.
What’s next for the UK’s infrastructure future?
The outlook is very encouraging. Infrastructure and net-zero targets are two of the government’s seven key pillars, supporting the nation’s broader Growth Mission. With clear government commitment and a wave of private investment anticipated, the UK has a real shot at leading in clean energy and infrastructure. We just need the clarity and a clear plan to get started.
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