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Asian investors look to the regions at MIPIM UK as Liverpool and Manchester reveal moves to secure developments

As the Chinese president’s visit heralded £40bn of committed investment, debate has intensified about just how lucrative UK opportunities can be and where overseas investors should be looking to inject their money.

Chinese president Xi Jinping was in Britain for less than a week. By the time he left, the government claimed nearly £40bn-worth of contracts between the UK and China had been signed.

It is hoped that the 36 deals (not all of which are new) will boost the economy and strengthen Sino-British relations, ushering in George Osborne’s “golden decade” of co-operation.

But now the media frenzy has died down, what are the deals that will affect UK contractors the most, are there more to come, and could this be a watershed moment for our construction industry?

“Why not the US, Australia or Canada instead?” Gibbs Investment representative Lyslee Li asked during a MIPIM UK panel session on the subject last week. For her, there are a host of reasons why Asian investors would be put off from investing in the UK.

The exchange rates alone are enough to deter some of her company’s clients, she argued, especially given that the relative weakness of the US dollar makes the States seem a far better bet. “They also have concerns the EU economy is not performing very well and that this could impact the UK,” she said. “So why the UK?”

Answering her question, Citic Capital senior managing director Stanley Ching said his company saw the UK as “very pro-business”, and applauded the government for its emphasis on infrastructure investment as a catalyst for wider economic growth - a point to which he said China could relate.

On top of this, the fund manager praised the UK’s legal system for being “very transparent” compared with a “tough” US system and talked up the benefits of speaking English, saying the language was another draw for Asian investors over rival EU countries.

Northern powerhouse

Much of the focus last week was away from London as the prime minister and chancellor continued to push their ‘Northern powerhouse’ agenda. Major deals were secured in Leeds, Sheffield and Manchester - to name a few - which will see billions of pounds flow into the North of England.

This shift in focus could be seen at MIPIM UK this year, which despite being based in the capital was largely focused on investment and development in the regions.

“Asian investors are becoming more comfortable with the prospect of moving outside of London and are increasingly looking at cities to be able to replicate what has happened in London”

Ged Fitzgerald, Liverpool Council

“Asian investors are becoming more comfortable with the prospect of moving outside of London and are increasingly looking at cities to be able to replicate what has happened in London,” Liverpool City Council chief executive Ged Fitzgerald told Construction News.

“Maybe it’s on a smaller scale with a smaller rate of return, but I would argue it’s a potentially more sustainable rate of return in the long haul because of the absence of volatility, which is seen in the London marketplace,” he added.

Citic Capital’s Mr Ching told Construction News his company was looking beyond London but was “still ‘screening’ to see where the opportunities lie”.

“We are more opportunity driven, so we are taking a more practical, deal-driven approach, which fits our investment criteria,” he explained.

As for deals in the capital, Mr Ching revealed that Citic Capital had joined forces with a UK developer on a residential scheme in central London but would not be drawn on details. The company is also on the hunt for office opportunities in the capital, he said.

Regional promotion

On the wider opportunities available for Asian investors, Mr Fitzgerald said it was important to educate investors on what different regions have to offer, and for cities to be promoting themselves as much as possible.

“It’s our job to make those propositions more known and to educate the investors to give them confidence and security that their investment will be as well-placed in an area of the North as it is in London,” he said.

Four major schemes involving Chinese companies

Hinkley Point C: China General Nuclear Corp

Hinkley Point C aerial CGI 1

EDF has agreed terms with China General Nuclear Corporation on a strategic investment agreement that will see EDF take a 66.5 per cent stake in the multi-billion-pound nuclear project, with
CGN taking 33.5 per cent.

Middlewood Locks: Beijing Construction Engineering Group

Beijing Construction and Engineering Group Chinese China Middlewood Locks Manchester

Beijing Construction and Engineering Group scored its second major UK victory after it was chosen as preferred contractor for the £700m residential and commercial Middlewood Locks development in Salford.

St Michael’s: Beijing Construction Engineering Group

Old Trafford Supporters Club Gary Neville Manchester United

BCEG has also taken a 21 per cent stake in St Michael’s, a mixed-use project being developed by former footballers Gary Neville and Ryan Giggs and Singaporean investor Rowsley, which also bought a 75 per cent stake in their Hotel Football development for £30m.

Royal Albert Dock: Citic Construction

Royal Albert Docks development site CGI1

Citic Construction has been named main contractor on ABP’s £1.7bn Royal Albert Dock scheme in east London. It understood that Citic
will now look to join forces with at least one of three UK contractors: Brookfield Multiplex, Laing O’Rourke or Mace.

Leading the way when it comes to both self-promotion and its ability to attract investment is Manchester. The city council leader Sir Richard Leese told Construction News overseas investors had a different approach to investing in the regions, compared with domestic players.

“[Overseas investors] are looking at 10-year investments and I think the UK market has got to be mature in the same way. They have got to move on from the ‘return in three years’ view, particularly in property, where they need to be looking beyond their return, at the place-making role [their] investment [could have].”

So far, with the notable exception of the Hinkley Point nuclear plant, much of the talk from China has been about property investment.

However, for the Northern powerhouse to really succeed, infrastructure projects such as east-to-west rail improvements need to be given more attention, argues Liverpool council’s Mr Fitzgerald.

Some Asian investors are already plotting a move from property into infrastructure.

“The concern is the uncertainty and what the impact would be to the UK if it wasn’t part of the EU”

Stanley Ching, Citic Capital

As Construction News reveals this week, developer ABP has up to £2bn to invest in other sectors such as roads and railway stations in addition to its £1.7bn Royal Albert Dock scheme in London.

ABP chief operating officer John Miu, whose company has joined forces with Citic Construction to create a new investment platform for UK projects, confirmed the team’s plan to develop beyond real estate.

He told Construction News that over the next 10 years the new company would look to invest between £1bn and £2bn in UK projects. This will include work in housing, commercial, roads, bridges, rail stations and tunnels, where Citic has particular expertise.

‘Brexit’ concerns

But despite the increased appetite for domestic projects, some overseas investors do have concerns. For Citic Capital’s Mr Ching, the potential exit from the EU is top of the list.

“It could be better or worse [for the UK], but the concern is the uncertainty and what the impact would be to the UK if it wasn’t part of the EU,” he said.

Liverpool council’s Mr Fitzgerald agreed: “Certainty and confidence are two vital ingredients for long-term and scalable investment propositions.

“On the horizon is the prospect of an EU referendum, where businesses don’t get to vote, so it will come down to how it plays out in the media and how politicians position themselves.”

However, GLA chief of staff and deputy mayor for policy and planning Sir Edward Lister disagreed that an EU referendum would be a deciding factor for overseas investors looking to back projects in the UK, instead arguing that potential changes around property law or taxation could have a bigger impact (see video below).

The impact of the Chinese president’s visit last week seems clear, with the PM hailing it as a “historic” moment in the two countries’ relations while urging UK businesses to go further.

As Mr Fitzgerald said: “If we don’t do it somebody else will; UK investment alone is not enough.”

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