UK Infrastructure Investment and Finance from a European and Global Perspective

Inderst, Georg (2017): UK Infrastructure Investment and Finance from a European and Global Perspective.

Abstract

This study provides an overview of UK infrastructure investment and finance in an international context, yielding interesting facts and insights for both investors and policy makers worldwide. The UK is one of the leading countries in terms of private sector involvement in infrastructure, with several decades’ experience in regulating privatized utilities and in developing public-private partnerships (PPP). It has attracted substantial European and global capital, and London is a major market place for the infrastructure and green business. However, the UK has also seen decades of weak spending by the state (and taxpayers) on infrastructure. The country needs more investment when public budgets are already stretched. The question is whether private capital will be so easily available in future, especially from institutional and foreign investors.

• Item Type: MPRA Paper
• Language: English
• Keywords: infrastructure investment, infrastructure finance, project finance, public-private partnerships, institutional investors, pension funds, infrastructure policy
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation; G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

References

ABI (2015), UK Insurance & Long Term Savings. Key Facts. Association of British Insurers.

ACE (2012), Performance of PFI. 1996-2010: lessons learned. Association for Consultancy and Engineering.

AIC (2017), Investment companies tables. The Association of Investment Companies. Retrieved March 2017.

Allen, J. and Pryke, M. (2016), Offshoring the nation’s water. In: Raco, M. (2016) (Ed.), Britain for sale? Perspectives on the costs and benefits of foreign ownership. The Smith Institute.

Alonso, J., Arellano, A. and Tuesta, D. (2016), Pension Fund Investment and Financial Regulation. In: Mitchell, O., Maurer, R. and Orszag, M., Retirement System Risk Management: Implications of the New Regulatory Order. Oxford University Press.

Arcadis (2015), Global Built asset Wealth Index 2015.

Arcadis (2016), Third Global Infrastructure Investment Index 2016.

ASCE (2016), Failure to Act. Closing the Infrastructure Investment Gap for America’s Future. American Society of Civil Engineers.

ASCE (2017), Report Card for America’s Infrastructure. American Society of Civil Engineers.

Beeferman, L. and Wain, A. (2012), Defining Matters. Harvard Law School Paper.

Blanc-Brude, F. (2012), Pension Fund Investment in Social Infrastructure. Edhec-Risk Institute.

CBI (2016), Thinking Globally. Delivering Locally. CBI-AECOM Infrastructure Survey 2016.

CECA (2013), Securing our economy: The case for infrastructure. CECA and Cebr, London.

Citibank (2016), Infrastructure for Growth. Citi GPS: Global Perspectives & Solutions.

City of London (2013), Institutional Investment in the UK from Emerging Markets. Special Interest Paper.

City of London (2016), Globalising Green Finance: The UK as an International Hub.

Cobley, M. (2014), Privately held share of UK infrastructure climbs steadily. Financial News, 25 November 2013.

Coelho, M. C. and Dellepiane, S. (2016), Power, Transport, Aviation and Water: the Political Economy of Infrastructure in the UK. University of Strathclyde, International Public Policy Institute, Occasional Paper.

Dealogic (2015), Project Finance Review. Full Year 2014.

Della Croce, R. (2011), Pension Funds Investment in Infrastructure: Policy Actions. OECD Working Papers on Finance, Insurance and Private Pensions, No. 13.

Donaubauer, J., Meyer, B., Nunnenkamp, P. (2014), A New Global Index of Infrastructure. Kiel Institute for the World Economy, Working Paper No. 1929, June 2014.

Égert, B., Kozluk, T. and Sutherland, D. (2009), Infrastructure and Growth: Empirical Evidence. OECD Economics Department Working Papers, No. 685.

EIB (2016a), Investment and Investment Finance in Europe. Financing productivity growth. European Investment Bank.

EIB (2016b), Restoring EU competitiveness. 2016 Updated version. European Investment Bank.

Engel, E., Fischer, R., Galetovic, A., The Economics of Public-Private Partnerships. A Basic Guide. Cambridge University Press 2014.

EPEC (2017), Market Update. Review of the European PPP Market in 2016.

EPI (2016), 2016 Environmental Performance Index. Yale University.

Ernst & Young (2017), Renewable energy country attractiveness index (RECAI). May 2017.

European Commission (2011), Stakeholder Consultation Paper on the Europe 2020 Project Bond Initiative. Commission Staff Working Paper, February 2011.

European Commission (2016), State-Owned Enterprises in the EU: Lessons Learnt and Ways Forward in a Post-Crisis Context. European Economy Institutional Paper 31, July 2016.

First State Investments (2016), Infrastructure regulation: the road ahead. Research Paper.

Flyvbjerg, B. (2009), Survival of the unfittest: why the worst infrastructure gets built - and what we can do about it. Oxford Review of Economic Policy, Vol. 25, No. 3.

FT (2016), The FDI Report 2016. Financial Times, FDI Intelligence.

GIH (2017), InfraCompass. Set your infrastructure policies in the right direction. Global Infrastructure Hub In cooperation with KPMG.

GLIO (2017), Global Listed Infrastructure Total Returns & Breakdowns. Global Listed Infrastructure Organisation.

Grice, J. (2016), National accounting for infrastructure. Oxford Review of Economic Policy, Vol. 12(3), pp. 431-445.

Hall, D. (2015), Why Public-Private Partnerships Don’t Work. PSIRU.

Helm, D. (2009), Infrastructure, investment and the economic crisis, in: Helm, D., Wardlaw, J., Caldecott, B., Delivering a 21st Century Infrastructure for Britain, Policy Exchange, London.

Helm, D. (2013), British infrastructure policy and the gradual return of the state. In: Oxford Review of Economic Policy, Vol. 29, No. 2, pp. 287-306.

Helm, D. and Tindall, T. (2009), The evolution of infrastructure and utility ownership and its implications. Oxford Review of Economic Policy, Vol. 25(3), pp. 411-434.

Heseltine, M. (2012), No Stone Unturned. Lord Heseltine Report.

HM Government (2017), Building our Industrial Strategy. Green Paper, January 2017.

HM Treasury (2008), Infrastructure procurement: delivering long-term value.

HM Treasury (2010), National Infrastructure Plan.

HM Treasury (2011), National Infrastructure Plan.

HM Treasury (2012a), National Infrastructure Plan: update.

HM Treasury (2012b), A new approach to public private partnerships.

HM Treasury (2013), National Infrastructure Plan.

HM Treasury (2014), National Infrastructure Plan.

HM Treasury (2016a), National Infrastructure Delivery Plan 2016-2021.

HM Treasury (2016b), National Infrastructure Delivery Plan 2016-2021. Funding and Finance Supplement.

HM Treasury (2016c), National Infrastructure and Construction Pipeline. Analysis.

HM Treasury (2016d), Private Finance Initiative and Private Finance 2 projects: 2016 summary data. December 2016.

ICE (2014), The State of the Nation, Infrastructure 2014. Institution of Civil Engineers.

IEA (2016), Infrastructure spending and economic growth. Institute of Economic Affairs, November 2016.

Inclusive Prosperity Commission (2015), Report of the Commission on Inclusive Prosperity. Center for American Progress, January 2015.

Inderst, G. (2009), Pension Fund Investment in Infrastructure. OECD Working Paper on Insurance and Private Pensions, No. 32.

Inderst, G. (2010), Infrastructure as an asset class. EIB Papers, Vol. 15, No. 1.

Inderst, G. (2013), Private Infrastructure Finance and Investment in Europe. EIB Working Papers, 2013, No. 2.

Inderst, G., Kaminker, Ch., Stewart, F. (2012), Defining and Measuring Green Investments. OECD Working Papers on Finance, Insurance and Private Pensions, No.24.

Inderst, G. and Della Croce, R. (2013), Pension Fund Investment in Infrastructure: a Comparison between Australia and Canada. OECD Working Papers on Finance, Insurance and Private Pensions, No. 32.

InfraDeals (2016), InfraDeals trend report: 2015.

Institute of Directors (2010), Infrastructure – mind the gap! London.

Insurance Europe (2013), Funding the future: Insurers’ role as institutional investors.

ITF (2017), Strategic Infrastructure Planning. International Transport Forum/OECD.

Kolev, A. (2013), Structural developments of gross fixed investment in Europe. In: Investment and Investment Finance in Europe. European Investment Bank.

Local Government Group (2010), Funding and Planning for Infrastructure.

Long, N. (2016), Global WOW: the 388 infrastructure funds doing battle for LGPS cash revealed. Modern Investor, 1 November 2016.

LSE Growth Commission (2013), Investing for Prosperity. Report of the LSE Growth Commission.

Makovšek, D. and Veryard, D. (2016), The Regulatory Asset Base and Project Finance Models. International Transport Forum, Discussion Paper, 2016/01.

McKinsey (2013), Infrastructure productivity: How to save $1 trillion a year. McKinsey Global Institute.

Mercer (2016), European Asset Allocation Survey.

Mor, F. (2017), Infrastructure policies and investment. House of Commons Library, March 2017.

Nabarro (2016), Nabarro Infrastructure Index: Bridging the gap.

NAO (2011), Lessons from PFI and other projects. National Audit Office, HC 920.

NAO (2013), Planning for economic infrastructure. National Audit Office, HC 595.

NAO (2015a), The choice of finance for capital investment. National Audit Office, Briefing.

NAO (2015b), UK Guarantee scheme for infrastructure. National Audit Office, HC 909.

NIC (2017), National Infrastructure Commission framework document. January 2017.

Northern Ireland Executive (2012), Investment Strategy for Northern Ireland 2011-21.

OBR (2016), Financial sustainability analytical paper: Public sector balance sheet. Office for Budget Responsibility, July 2016.

OBR (2017), Public Finances Databank. March 2017.

OECD (2014a), Pooling of Institutional Investors Capital – Selected Case Studies in unlisted equity infrastructure.

OECD (2014b), Private Financing and Government Support to promote Long-term Investments in Infrastructure.

OECD (2015a), Mapping Channels to Mobilise Institutional Investment in Sustainable Energy, Green Finance and Investment. OECD Publishing, Paris.

OECD (2015b), OECD Economic Surveys, United Kingdom.

OECD (2015c), OECD Review of Public Governance of Public-Private Partnerships in the United Kingdom.

OECD (2016), Annual Survey of Large Pension Funds and Public Pension Reserve Funds 2015.

OFT (2010), Infrastructure Ownership and Control Stock-take. Office of Fair Trading Report 1290, December 2010.

ONS (2015a), Value of UK infrastructure. Office of National Statistics, 3 December 2015. https://www.ons.gov.uk/aboutus/transparencyandgovernance/freedomofinformationfoi/valueofukinfrastructure

ONS (2015b), Ownership of UK Quoted Shares: 2014.

ONS (2016), The UK national balance sheet: 2016 estimates. Office for National Statistics, 18 August 2016.

ONS (2017), Output in the Construction Industry explorable datasets. April 2017.

Panayiotou, A. and Medda, F. (2014), Attracting private sector participation in infrastructure investment: the UK case. Public Money & Management, Vol. 34(6), pp. 425-431.

Pinsent Masons (2014), China Invests West. Pinsents Masons and Cebr, London.

Pisu, M., Pels, P. and Bottini, N. (2015), Improving Infrastructure in the United Kingdom. OECD Economics Department Working Papers, No. 1244.

PLSA (2016), PLSA annual survey 2016. Pensions and Lifetime Savings Association.

Preqin (2015), The Top 100 Investors in Infrastructure. Infrastructure Spotlight, June 2015.

Preqin (2016a), 2016 Preqin Global Infrastructure Report. London.

Preqin (2016b), The UK Infrastructure Market. London.

PwC (2015a), Capital project and infrastructure spending. Outlook to 2025. Research findings.

PwC (2015b), The role and impact of specialist investors in UK infrastructure.

Raco, M. (2016) (Ed.), Britain for sale? Perspectives on the costs and benefits of foreign ownership. The Smith Institute.

Reform (2009), Road to Recovery.

Rhodes, Ch. (2014), Infrastructure Policy, House of Commons Library, 9 Dec 2014.

RICS (2013), The Global Infrastructure Challenge: The Role of PPP in a New Financial and Economic Paradigm.

S&P (2007), Listed infrastructure Assets – A Primer, Standard & Poor’s.

S&P (2016), IPE Real Estate, Special Issue: Real Assets 2016.

Stern, J. (2014), The British Utility Regulation Model: Its Recent History and Future Prospects. CCRP Working Paper No 23, City University London.

Subacchi, P., Pickford, S., Tentori, D. and Huang, H. (2014), Building Growth in Europe. Chatham House Report.

TheCityUK (2014), Infrastructure 2014. Financial Market Series.

TheCityUK (2015), Sovereign Wealth Funds. Financial Markets Series.

The Economist (2014), Channel tunnel’s 20th birthday holds lesson on big projects. 5 May 2014.

The Scottish Government (2015), Infrastructure Investment Plan 2015.

Thomson Reuters (2017), Project Finance Review. Full Year 2016.

Topham, G. (2017), British rail is nationalised all over again – by foreign states. The Guardian, 1 April 2017.

TUC (2016), UK languishing near bottom of OECD rankings for investment in vital infrastructure. Trades Union Congress, 16 November 2016.

UBS (2016), Pension Fund Indicators 2016.

UKRN (2014), UK Regulated Infrastructure. An Investor Guide. UK Regulators Network.

UNCTAD (2016), World Investment Report 2016. Investor Nationality: Policy Challenges.

Vecchi, V., Hellowell, M. and Gatti, S. (2013), Does the private sector receive an excessive return from investments in health care infrastructure projects? Evidence from the UK, Health Policy, 110-2, pp. 243-270.

Wagenvoort, R., De Nicola, C and Kappeler, A. (2010), Infrastructure Finance in Europe: Composition, Evolution and Crisis Impact. EIB Papers, Vol. 15, No. 1.

WEF (2016), The Global Competitiveness Report 2016–2017. World Economic Forum.

Wellings, R. (2016), Without Delay. Getting Britain’s railways moving. IEA Discussion Paper No.69.

Welsh Government (2012), Wales Infrastructure Investment Plan for Growth and Jobs.

Willis Towers Watson (2016), Global Alternatives Survey 2016.

World Bank (2016), Connecting to Compete 2016. Trade Logistics in the Global Economy.

World Bank (2017), World Development Indicators. Retrieved March 2017.