Treasury representatives are meeting with leading pension fund members at least twice a month, with a view to making a public announcement by the 2012 Budget on how they intend to open the gates to UK infrastructure investment.
The timetable is set out in the memorandum of understanding, signed between HM Treasury and the National Association of Pension Funds and the Pension Protection Fund on 22 November 2011, and aimed at devising solutions to overcome barriers to investment in UK infrastructure.
The MoU was heralded by Chancellor George Osborne during the autumn statement as central to stimulating infrastructure investment and economic growth.
The agreement, signed by Infrastructure UK chief executive Geoffrey Spence, NAPF CEO Joanne Segars and PPF chief executive Alan Rubenstein, commits to formulating a “transparent framework and working process for developing potential proposals for a suitable investment platform (s)/conduit (s) aligned with key objectives and milestones”.
All parties have agreed in principle to making a public statement of progress by the 2012 Budget in March.
A lack of specialist knowledge and an aversion to construction risk are two of the central obstacles to investment from British pension funds, which currently only invest 2 per cent of trillions of pounds of assets in infrastructure. The NAPF alone has 1,200 members and £800bn of assets.
The MoU says the UK needs £170 billion of new infrastructure investment over the next five years and that pension funds are keen to invest in assets that offer stable, inflation-linked, longer term yields. It says infrastructure can offer this if structured properly, but that the current investment model and structure does not accommodate it.
The MoU lists accountability and transparency, effective coordination, regular information exchange and competition law compliances as four guiding principles. The Treasury will provide resource and support to develop potential investment options, separate from formal and independent third-party advice.
The parties will also be expected to procure their own independent external advisers before formalising any commercial, financial or legal arrangements.
Ms Segars told CNPlus last month that the MoU is focused on investment in existing assets, rather than new build projects.