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Managers look to opportunities following Budget’s infrastructure and ESG boost

18 March 2020

Following the announcement by the Chancellor in this month’s Budget that the government would allocate over £600 billion of new spending to infrastructure, investment managers welcomed the boost to the sector.

Philip Kent, manager, GCP Infrastructure Investments, said: “We welcome the announcement as part of the Budget that the publication of the UK’s National Infrastructure Strategy will occur later in Spring, which will set out plans for a ‘once in a generation transformation of the UK’s economic infrastructure’. The Budget commits to increases in government spending in areas which are likely to generate private sector investment opportunities.”

Chancellor Rishi Sunak’s pledge to commit £600 billion by 2025 was part of the government’s plan to “rebalance opportunities” and lay the foundations for a decade of growth, he said. It will be spent on road upgrades, high-speed broadband, rail links, flood defences, mobile signal coverage and housing projects, but further details on specific projects will not be announced until the comprehensive spending review later this year.

Harry Seekings, co-head of infrastructure, InfraRed Capital Partners, commented: “The Government set out clear ambitions and commitments for infrastructure spending. We await further details on how these plans will be realised when the Government publishes its National Infrastructure Strategy this spring, but we are pleased to see that there is real commitment to investing in our infrastructure – both existing and new – to ensure the UK is fit for the future.”

Investment managers also pointed to the ESG benefits of infrastructure investment.

Giles Frost, co-founder, Amber Infrastructure, manager of International Public Partnerships, said: “The 130 assets in which we currently invest provide the public with services on which more than 2.5 million people rely every day. It’s that innate social benefit which makes infrastructure an ESG-friendly allocation for investors.

“Amber’s team focus on making sure we’re investing in the right type of infrastructure that continues to provide value for money for the operators and users of our schools, civic buildings, transportation assets and regulated utility-style holdings as well as attractive rewards for our investors. We review all our investments against the UN Sustainable Development Goals.”

Kent added: “All infrastructure, by definition, fulfils a social purpose and therefore is highly rated on ESG criteria.  GCP Infrastructure Investments has invested over £750m in renewable energy projects since IPO ten years ago, displacing generation from traditional fossil-fuel sectors and the associated greenhouse gas emissions.”

Looking ahead, managers were positive about the sector, noting that urbanisation, population growth and climate change, combined with digitisation, will require significant new investment infrastructure to meet the needs of future generations.

Seekings said: “We must sustain what we have and finance new infrastructure, to decarbonise our energy, to support an ageing population and to transform our transport systems. But we must also recognise the strain this places on public resources and expertise, and therefore the importance of the role of private capital.”

Kent added: “The need to maintain, upgrade and transform the UK’s infrastructure remains as relevant as ever and the private sector is likely to have a key role in the delivery and financing of this infrastructure.”

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