The Confederation of British Industry (CBI) has criticised Government for not following through on its pledge to support infrastructure investment. In its new report, ‘An offer they shouldn’t refuse: attracting investment to UK infrastructure’, the CBI address the main barriers to attracting the £250 billion of investment needed to repair and update Britain’s creaking infrastructure.
As Britain continues to embark on its austerity programme to reduce the deficit, public finances are spread thinner than ever before. Therefore, much of the investment needed will come from the private sector. In order to attract private investment the CBI recommend that Government should target specific projects to enhance their credit rating and make them more attractive to investors, pool pension funds beyond the Pension Infrastructure Platform (PIP) and build up in-house skills, commercialise the public sector’s approach to infrastructure and create a single, attractive shop window for would-be investors and ensure Solvency II doesn’t act as a barrier to private investment.
John Cridland, CBI Director-General, said: “Infrastructure spending offers the UK the elusive growth boost we are all seeking. Business has been disappointed that we haven’t made more headway in the past six months, and hopes that this report will act as a catalyst.
“As this report makes clear, if we want to see the billions of pounds needed to upgrade our ageing infrastructure and secure jobs and growth for the long-term, the Government must make smarter use of limited public finances. By underpinning and lifting the credit rating of certain infrastructure assets, it can make them less risky and more attractive to investors.”
The CBI maintains that, although foreign investment in UK infrastructure remains healthy, domestic investors such as pension funds have barely entered the market.
Cridland added: “If we can capture just a fraction of the £1.5 trillion of capital held in UK pension funds, and invest a further 2 percent of their total assets in infrastructure, this would make a huge contribution to renewing our energy, transport and other infrastructure.
“With banks and institutional investors, including pension funds, working together to find new ways to fund infrastructure development, the Government must play its part by removing hurdles, and acting in a more commercial, investment-savvy way. An attractive, professional one-stop shop window for investors must be the right way forward.”
The document also proposes that Government should investigate other ways to incentivise pension funds to invest in infrastructure, by, for example, looking at establishing a dividend tax credit targeted purely at new projects.
Cridland concluded: “To help make investors an offer they shouldn’t refuse, the Government must enhance the credit rating of brand new projects, extend capital allowances to cover all types of infrastructure, ensure Solvency II doesn’t act as a brake on growth and consider the introduction of a time-limited dividend tax credit for pension funds investing in new projects.”
