Delays to the first new nuclear plant for a generation at Hinkley have raised questions about the prime minister’s appetite for Chinese investment in major infrastructure here.
State-backed China General Nuclear Company is expected to fund a third of the Hinkley Point C project, but approval has been delayed by the PM amid alleged concerns over Chinese interests in high-security projects.
Chinese ambassador to the UK Liu Xiaoming has already warned that the government’s future decision on Hinkley Point C has put the countries’ relationship at a “crucial juncture”.
He added that any further delays could place the “mutual trust” between both nations at risk.
Pinning the additional scrutiny over Hinkley on to concerns about cyber security has already been described as “a red herring” by industry sources, and contractors are privately confident that the project will still go ahead when the government makes its decision in the coming months.
But with China already investing across the UK, with particularly close ties to Manchester, what will this mean for the Northern Powerhouse?
Northern cities, particularly Manchester and Sheffield, have forged close ties with Chinese firms and both had built relationships with Chinese companies long before the Northern Powerhouse concept became a policy under former chancellor George Osborne.
Schemes such as Manchester’s Airport City have had a long association with Chinese investment – Beijing Construction Engineering Group (BCEG) first announced an £800m investment in the scheme in October 2013.
Manchester Airport City aerial
On top of this, BCEG was picked as the preferred contractor for Scarborough Group’s £700m Middlewood Locks development, with work already under way at the mixed-use scheme on the edge of the city centre.
And while these deals were pre-Brexit, since June’s referendum Sheffield City Council has signed a 60-year partnership with Chinese firm Sichuan Guodong Construction Group, which will initially provide £220m of funding for “four or five” landmark projects over the next five years, although the identity of those projects is yet to be revealed.
So Chinese investment in the North continues apace – but what impact will recent developments have on the Northern Powerhouse as a whole?
One senior industry source says that much of the government’s future plans for the North are more reliant on foreign investment than they might seem at first.
”Hinkley delays will test the good bilateral relationship that Manchester has worked hard to achieve with Chinese investors”
Ben Connor, Kuits
“If the government was really determined that it will go ahead and that it’s going to thrive, and they were putting in the cash, they’d want some credit for it,” he says. “So not all the cash is coming from the government, so where else is it coming from?”
The source adds that, while Chinese investment has been happening for years, “everything changed” in October last year when Chinese president Xi Jinping visited the UK. “My understanding is that he gave his commitment on how China could be a key part of the Northern Powerhouse agenda,” the source says.
Beijing Construction and Engineering Group Chinese China Middlewood Locks Manchester
That, however, was before the additional delay to Hinkley, the Chinese ambassador’s comments in the press, and the vote to leave the EU, all of which have raised fears that Chinese investment in the UK may be under threat – including China’s role in the Northern Powerhouse.
Ben Connor, head of construction at Manchester-based law firm Kuits, says any further delays to Hinkley, or even the cancellation of the project, could have serious consequences for Chinese investment in the North.
“If [Hinkley] doesn’t proceed, and particularly if it doesn’t proceed because of perceived security concerns, China can be expected to react badly to the loss of face,” he says. “In that scenario, we expect relations to cool and that will certainly test the good bilateral relationship that Manchester, in particular, has worked hard to achieve with Chinese investors over recent years.”
However, speaking to contractors working closely with Chinese firms, the mood is still optimistic.
One director at a top-100 contractor, which is working on a major scheme with Chinese investment, insists the Chinese firms investing in the UK project remain “fully engaged” and have been “from day one”.
Generic_Sheffield city centre_CREDIT Jason Parrish
Source: Jason Parrish
“They’re not worried about everything that’s happened with Brexit,” he says. “They have a long-term vision of what they want to do.” He adds that China would be investing in UK projects “regardless” of whether the country had voted to remain or to leave the EU.
And though it was secured before further delays to Hinkley, additional Chinese investment in the North has still been forthcoming after the EU referendum, in the form of Sichuan Guodong Construction Group’s deal with Sheffield.
“If we don’t embrace [Chinese investors], I think we’ll find ourselves getting left behind”
When the deal was announced, Sheffield’s Chamber of Commerce executive director Richard Wright said the investment “should remove years of scepticism in one stroke”. “It’s not just the money, which is huge, but it’s a statement of faith in our potential,” he added.
And with a deal already inked, that investment looks secure in spite of what happens at Hinkley.
That “long-term vision” alluded to by industry sources should show that Chinese firms are fully committed to investment, especially in the North.
One contractor sums up the mood in the North with a warning to those who still have doubts whether Chinese investment will help the industry.
“Some people are nervous about Chinese contractors, but we’ve been to China and seen the quality of their supply chain and the quality of their buildings, and if we don’t embrace them, I think we’ll find ourselves getting left behind,” he says.