How Infrastructure Sector Is Evolving In UK?

  • Jan 14, 2019 GMT
  • Team Kalkine
How Infrastructure Sector Is Evolving In UK?

Two of the London’s largest infrastructure projects have been firmed for further detainment on opening as construction is running behind the scheduled deadline.

North London’s Tottenham Football stadium had been scheduled to open in September, but it further got deferred until at least in March, which is increasing the cost of the project from 850m to about 1bn.

The club’s owners defended the delay with the fixing of critical cables and complex software.

In the meantime, London’s transport authority has confirmed that they will not be able to open Crossrail project until at least the middle of 2020, which can increase the cost of project to 17.6bn.

London’s east-west railway, which was scheduled to open last December, has not assured any new opening time.

Funding chaos and absence of Political vision seems to hold back infrastructure projects in UK

The quality of Britain’s infrastructure downgraded to a level at 24th in the world in 2016/ 2017 from 19th in 2006 by the World Economic Forum. With this ranking Britain was seen to be sitting at the bottom of the group of G7 nations.

Single biggest issue is lack of funds. Following the 2008 crisis, David Cameron’s coalition government emphasised on austerity programme that involved cutting down spending to reduce public borrowings.

After winning the 2015 election. Theresa May’s government planned for 500bn infrastructure projects, ranging from sewers to broadband. The proposed infrastructure projects rely heavily on attracting the wallet strings of the private sector investors.

While Private investors open string of their wallet enthusiastically to put equity into existing infra projects because there is no risk associated to the construction, but they are cautious on so-called greenfield projects.

“The biggest difficulty is to convince investors to take risk on major new projects” says Andy Rose, chief executive of the Global Infrastructure Investor Association.

Current government is not the first one who is trying to persuade the private sector investors to put large sums in infrastructure projects. Britain was the first one that developed the Private Finance Initiative, a model that is now popular across the globe. However, Private Finance became exploded partly because of lack of substantiation.

Another hurdle in getting private sector funding is the lack of long-term vision from central or local government

“Cities like Berlin, Amsterdam, Dublin and Copenhagen are attracting private investors because they have a clear vision and strategic plan”, says Lisette Van Doorn, CEO of Urban land Institute Europe, a research body.

There are no occult things to remedy Britain’s infrastructure ills, but there are specific things that the government could do to raise the fund from both the public and private sectors.

For example, Ministers can raise more funds from private investors by identifying proposed infrastructure projects that will provide long-term source of revenue.

To do so, the government needs to demonstrate to investors from where the future long-term stream will come from. Meanwhile, group of experts also emphasise that the government needs to engage more effectually to fix local opposition to projects that could provide wider benefits.

But bunch of experts argue that the government should capitalize the record low interest rates to fund greenfield projects over private financing.

Given the scenario, there is a mixed view on investing in infrastructure and the same line of thoughts runs for infrastructure related equities as well.

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

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