UK infrastructure – rising up ratings for investment but doubts remain

Global analysis of the world's leading countries for infrastructure investment has boosted the UK's rating to ninth, but slow political decision making is among a number of reasons hampering the UK's progress. According to the latest Global Infrastructure Investement Index (GIII) report from Arcadis, a commitment to infrastructure projects such as HS2 in a mature, stable and relatively low risk environment has helped raise the UK's rating from 13th in 2012 and 10th in 2014.

The proposed Crossrail 2, HS3 and developing plans of government's Northern Powerhouse initiative are among other reasons given for the UK's strengthening position as a place for infrastructure investment. The creation of the National Infrastructure Commission, with its remit for establishing a long term needs assessment, is seen as a welcome positive move by investors, the GIII report says.

However, the UK's slow politicized decision making process is preventing the UK from breaking into the world's top five countries for investment. The upcoming EU referendum is also a 'cloud on the horizon' for the UK's prospects. Investors are analysing the implications of a Brexit vote and deal flow has slowed in the run up to the vote, according to Arcadis.

Singapore tops the Arcadis global ranking for infrastructure investment, followed by Qatar, the UAE, Canada and Malaysia. Singapore's government has consistently spent 5% of GDP on infrastructure, equivalent to $20bn and is planning to increase this to $30bn, or 6% of GDP.  China remains the strongest economic environemnt, despite a recent relatively modest slow down in growth, but a less attractive business sector and higher risk have kept China at 17 in the ratings, the GIII report says.

This is against the backdrop of an annual global investment demand of $3.7tr and a $1tr yearly global shortfall. Falling oil and commodity prices and political instability is creating economic uncertainty, but infrastructure is increasingly viewed as a safe best for investors, particularly projects and assets that present good levels of sustainability.

In the UK, the recent £2bn purchase of London City Airport, by the Canadian pension fund Ontario Teachers Pension Plan, demonstrates the attractivebness of a long term stable asset base. Canadian pension funds now own or have stakes in three UK airports.