CBI responds to critical review of UK infrastructure finance market

Private finance will be essential to the delivery and success of the UK’s infrastructure over the next decade and beyond. Projects worth £600bn are planned between now and 2030, and the Chancellor, Philip Hammond, has publicly stated that around half of that needs to come from private sources.

HM Treasury and the Infrastructure & Projects Authority got in touch with the CBI inviting us to respond to their review of the UK’s infrastructure finance market.

This is a key area for the CBI’s members. Infrastructure is a critical pillar of the UK’s economic success: physical infrastructure such as road, rail and ports enhance connectivity and productivity between businesses at home and abroad; communities across the country run on our vital utilities infrastructure like energy, water and broadband; and social infrastructure – schools, hospitals and public housing – are essential parts of a high quality of public life.

As a result, the successful delivery of the country’s infrastructure, making sure it contributes to a growing economy and creates wealth across all regions, is an important objective for the CBI. This consultation provided a valuable opportunity to participate in the debate, championing the role that private investors and private companies play in making UK infrastructure modern, innovative and fit for the future.

Our response focused on three core themes. Firstly the need for government to ensure both public and private funding is secured for planed infrastructure projects. This includes recommending the government commit spending on infrastructure a percentage of GDP between 1-1.2% annually, while also focusing on improving the UK’s political and regulatory reputation as an attractive destination for private finance.

Secondly, the CBI’s response reinforced the benefits of the private sector in contributing expertise, innovation and skills to the delivery and operation of UK infrastructure. Businesses involved in the sector are keen to work with government to reduce risks, rewarding long-term value. Additionally, private finance and infrastructure make good partners: the use of private finance eases the burden on UK taxpayers, while for investors infrastructure is still seen to offer secure long-term returns on investment.

Thirdly,  the role of the many different public sector bodies involved in delivering infrastructure needs to be re-examined. For example, government should explore whether the National Infrastructure Commission needs to become a fully independent body, giving  it more clout in holding government to account. Equally, the CBI feels there is need for a much more extensive investor relations function within government to help attract private capital into UK infrastructure projects. The effectiveness of these roles should be assessed and strengthened.

The summary of the CBI’s recommendations are:

1. A joint effort between government and industry to promote the benefits and expertise the private sector brings to UK infrastructure should be considered
2. The government should deliver on the National Infrastructure Commission’s recommended level of public spending on UK infrastructure projects in its forthcoming spending review
3. The government should set out how support for emerging technology-orientated sectors in infrastructure can be attracted, where early finance is required to help build private investors’ confidence in the market
4. The government should explore options for a replacement vehicle for attracting private finance to UK infrastructure, particularly for those projects outside of the utilities sector
5. The government should look to embed the principles on risk allocation in Cabinet Office’s Outsourcing Playbook
6. The government should ensure the private sector’s role in building and operating infrastructure is rewarded more frequently for meeting long-term objectives
7. The government should develop a comprehensive investor relations function that specifically engages with international investors to encourage greater inward investment in UK infrastructure
8. The government should consider the feasibility of giving greater independence to the NIC so that it is empowered to hold the government to account on infrastructure delivery.