EC Harris has warned that infrastructure investors may overlook the UK, as funds increasingly view markets in the Gulf region and Asia as safer bets.
According to a report published by the firm, this could mean that the UK would be missing out on significant investment in its national infrastructure.
The firm’s ‘Infrastructure Investment Index’ ranked 40 countries across the globe according to how attractive they are to infrastructure funds.
In order to see how appealing these nations are to investors, the study looked at various issues including the ease of doing business in each market, tax rates, GDP per capita, government policy, the quality of the existing infrastructure and the availability of debt finance.
All of these factors combined provided a clear overview of the risk profile for each market, and how likely each one is to attract potential investors.
The report found that the high level of regulation, bureaucracy and high tax rates make the UK a less attractive place to invest, particularly when compared to markets such as Qatar, Malaysia and Chile.
EC Harris head of lenders & investors Matthew Cutts said: “Much has been made of the need to attract private finance to help address the UK’s infrastructure deficit.
“However, there’s still a significant gap between the political intent and the economic reality. Unless concerted steps are taken to provide greater policy certainty, loosen regulation, and speed up the approval process, investors will continue to look at other markets with fewer barriers to enter and where they can see a much clearer exit strategy.”
Besides high levels of regulation and a convoluted planning and approval process, the firm said a lack of transparency and low levels of innovation could also impact the ability to attract early private finance for flagship programmes such as HS2 or new-build nuclear programmes.
Infrastructure Investment Index:
The UK finished in 13th position overall in the final rankings, just behind the United States in 12th and slightly ahead of Germany in 14th place.
However, the figures for the UK and Western Europe were in stark contrast to the Middle East and Asia, with Singapore emerging as the world’s safest market to invest in infrastructure schemes.
Its APAC neighbours Malaysia and Australia were also in the top ten, finishing in 7th and 9th place respectively. In the GCC, Qatar and the UAE finished in second and fourth place overall.
The government set a target of investing £400bn into the UK’s infrastructure by 2020 at the inception of the first National Infrastructure Plan.
An additional campaign specifically targeting Chinese pension funds was also launched as part of last year’s Autumn Statement, however beyond China Investment Corporation’s move to acquire a stake in both Thames Water and BAA, the UK has until now had limited success in securing private finance.
Despite the government’s ambition, EC Harris attributes this failure in securing funds to the mixed messages from the coalition surrounding future policy direction, creating uncertainty.
Mr Cutts said: “The main attraction with infrastructure is the long-term, predictable, inflation-linked return it can offer investors. However, to secure the upfront capital there must be a commitment to sustaining long-term policy levers that will make these schemes bankable.
“Sadly this type of consensus is all too lacking in the UK, with the public squabbling over the recent Energy Bill and the on-going paralysis around expanding Heathrow, two examples of how weak leadership is threatening to undermine the UK’s future competitiveness.”
The report also raises concerns around whether strict regulatory parameters are potentially deterring investment in these key sectors.
Mr Cutts added: “Regulation can constrain an organisation’s ability to adapt to market forces which impacts on the potential return that can be secured here.
“In such an instance investors and operators need to be more creative in how they manage an asset and focus on solutions that help to unlock additional revenue streams or reduce overall operating costs.”