Government should bundle major projects together to derisk them and make them attractive to overseas investors, a leading consultant has said.
Greg Bradley, UK head of business advisory at Arcadis, suggested the approach to help overcome the obstacles to bringing further infrastructure investment into the country.
Mr Bradley was speaking after the UK was found to have slipped two places in the firm’s Global Built Asset Wealth Index for 2015, falling to 13th place,
Speaking to Construction News, Mr Bradley said that the key challenge was to make infrastructure investment attractive to private investors.
“[They] are looking for scale, so something that is a material investment, and second, they’re looking for certainty of revenue,” he said.
Mr Bradley highlighted Old Oak Common (pictured) as a “perfect example” of how to bundle assets to make them a better bet for investors.
In April, London mayor Boris Johnson launched the Old Oak Common Development Corporation, which will oversee the masterplan for the area and will have full planning powers across the scheme. In June, former GLA chief Victoria Hills was named as chief executive of the corporation.
“At Old Oak Common, you have HS2, overground rail, underground rail in a dense urban environment where there’s also an opportunity for commercial and residential developments,” said Mr Bradley.
The development, which will have both an HS2 and a Crossrail station by 2026, will aim to provide 24,000 new homes in the area.
Bundling up assets and masterplanning to scale up projects may be the key to unlocking further investment, added Mr Bradley.
“Part of the problem is we may describe the programme by its constituents - asset class components - not as an overall integrated portfolio or an investable masterplan”, he said.
“If things are valued individually - £100m, here and £50m there – it becomes very, very fragmented, so you don’t get that efficiency. Overseas investors will make material finance available at a very attractive rate, but there’s got to be scale for them, otherwise it’s just too small.”
But Chris Hallam, infrastructure and construction partner at Pinsent Masons, said there was “limited opportunity” to apply the Old Oak Common model to other schemes, particularly outside the capital.
“If you were to apply it, the main areas would be the HS2 interchanges, such as Manchester exchange or Sheffield - they’re not necessarily the only places, but these are most obvious ones,” he said.
“If you look at Old Oak Common, it’s a transport hub, so that’s where you’ll get the most footfall of people and you can start regenerating and redeveloping the areas – it snowballs from there.”
However, he added that smaller populations would make it more difficult to use a similar model away from London.
Read more on the challenges facing infrastructure investment in the UK in tomorrow’s data-led feature, including analysis of how the industry can encourage more private investment into major infrastructure projects