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UK infrastructure to receive £105bn of Chinese investment

More than £100bn-worth of investment will flow into the UK by 2025, creating opportunities for joint ventures and strategic partnerships between UK and Chinese construction firms, according to new research.

A report by law firm Pinsent Masons, China Invests West: Can Chinese investment be a game-changer for UK infrastructure? has revealed that £105bn of Chinese investment will flow into the UK’s infrastructure between 2014 and 2025.

Of this, the UK’s energy, transport and real estate sectors are predicted to receive the bulk of investment, with £43.5bn, £25.5bn and £36bn respectively.

The research predicts that Chinese construction firms will play a “catalytic role” in transforming the UK’s construction sector through joint ventures and partnerships.

Chinese investment will open the door for China’s “massive” construction and engineering businesses, presenting opportunities in the form of joint ventures with UK companies as well as the sourcing of equipment and materials from China’s “vast” manufacturing industries, the report said.

The research was prepared and written by a team of infrastructure and economics experts from Pinsent Masons and the Centre for Economics and Business Research.

Participants interviewed for the research include CapCo chief executive Ian Hawksworth, Costain chief financial officer Tony Bickerstaff, British Land executive director and head of offices Tim Roberts, Mace chief executive Mark Reynolds and China Communications Construction Company business manager Ju Fang.

Costain’s Mr Bickerstaff said inward investment could “principally” involve joint ventures, while Laing O’Rourke group chief executive Anna Stewart said China had a “significant future role” to play in the UK’s infrastructure and real estate sectors.

Industrial and Commercial Bank of China said: “As Chinese investment into UK infrastructure has just begun, Chinese enterprises may look favourably towards the formation of joint ventures, as they can provide many potential benefits.

“However, from cumulative lessons learned from international experiences, strategic alliances will gradually transform into independent investment.”

The report said “The reality is that partnership with China will ultimately be about creating evermore opportunities for China to export equipment and materials to the UK and into other western markets.”

The research detailed how limited skills and capacity could constrain the impact of investment from China.

Mott MacDonald chairman Keith Howells said: “Supply chain capacity bottlenecks are a real issue in the UK, and could ultimately be a constraint on the impact of investment from China.”

The research predicts China’s total outbound investment to rise six-fold by 2025, from around $100bn in 2013 to $600bn in 2025.

It details three forecasts of Chinese outbound foreign direct investment, which are a bearish, a bullish and a base case.

Under the base case scenario, the report said total stock of FDI into the UK is forecast to rise eight-fold from £18bn between 2005 and 2013 to £144bn between 2014 and 2025.

Pinsent Masons partner Helen Chen said: “Infrastructure will prove to be one of the most attractive classes for Chinese investment into the UK, which follows a very open market approach.”

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