Research from international law firm Nabarro reveals the UK remains top of the Nabarro Infrastructure Index as the most attractive country for infrastructure investment. The top five countries in the Index are rounded out by Canada, the US, Australia and UAE in second, third, fourth and fifth places respectively.
The expanded Index, commissioned by Nabarro and last conducted in 2012, now ranks twenty five countries representing all five major world regions by their attractiveness for infrastructure investment. Ranking is based on several factors including the tax environment, the availability of credit and the country’s economic stability, national stability, ‘ease of doing business’, level of private participation, and sustainability and innovation.
Rt Hon Lord Adonis PC, Chair of the newly created National Infrastructure Commission, says: “It is great to see the UK doing so well in this year’s Index. It is a credit to the positive conditions for infrastructure investment created by the previous and current governments. However, it is paramount that the UK also identifies and secures a good pipeline for investors. Without it, the Nabarro Infrastructure Index shows that the US and Canada offer equally attractive conditions for infrastructure investment which could threaten the UK’s number one position.
“The National Infrastructure Commission has been established to ensure the UK remains an important and attractive market for infrastructure investment. It takes a long-term view of the country’s infrastructure needs as well as advising government and parliament on key priorities that will help to ensure we stay at the forefront of infrastructure delivery.”
The Nabarro Infrastructure Index ranks the UK as the most attractive environment based on chart-topping sustainability and innovation, one of the highest scores for private participation, comparatively strong credit and stability and a high degree of national stability.
Kristy Duane, partner and Head of Infrastructure at Nabarro, says: “The improvements in the UK’s credit and stability scores, the tax environment, and the levels of involvement in private participation are all positive indicators. However, it is important that the UK does not become complacent despite these strong economic conditions. The gap in its lead in sustainability and innovation has narrowed significantly and we are some way behind in other categories like tax environment.”
The Index highlights the importance of Governments not just in setting the right conditions for investment, but in providing the opportunities to invest in projects that actually go through to completion.
Duane, adds: “A pipeline is no good, if it is just a pipe dream. Real opportunities that are seen through to completion are what is needed for investment.”
Four of out of the five top ranked countries in the Index have devolved decision-making powers. The top ranked UK has also benefited from devolution in its infrastructure decision-making, with the Infrastructure Index highlighting the increasingly important role that devolved government plays. Whilst not a federal state like the other countries in the top five, the UK has devolved increasing amounts of control to national and local governments. The largest of Australia’s states and Canada’s provinces operate their own procurement bodies and the UAE’s emirates operate a top-down system that has allowed the individual emirates to build specialisms (e.g. Dubai’s financial services capabilities and Abu Dhabi’s utilities competences).
The most notable impact of devolution (or lack thereof) is seen in the risers and fallers in the 2015 Infrastructure Index. China’s struggles in making its local governments more accountable paired with its growing economic woes, has seen it slide down four places in this year’s Index. The difficulties that face infrastructure investors when doing business in India, which has one of the lowest scores for ease of doing business, is worsened by a lack of responsive and accountable local governments, and saw it slip three places in the Infrastructure Index. France, which saw a steep decline in all metrics of measurement, also dropped three places.
The biggest improvements were seen by the UAE, Spain and Italy, which all rose seven places, and the Philippines, which gained five places. All four markets have seen strong improvement in their private participation score, but have also seen gains in other measures. The UAE saw increases in their credit and stability and sustainability and innovation scores, whilst Spain saw improvements in its tax environment.
A new entrant to the Index, Turkey, which sits at tenth place, is a promising opportunity for investors. It has lowered the country’s dependence on natural resources and as a result has seen some of its construction companies emerge as global players. However, some are still reluctant to take a gamble on the region due to its location and [changeable] political atmosphere.
Tough economic conditions have meant that government budget deficits are also contributing to falls in support for renewables across the developed world. Despite its top rank for sustainability and innovation, the UK has reigned in its support for renewables, whilst Spain and Italy have cut tariffs for existing and new solar plants respectively much to investor discomfort. However, these cuts have not been enough currently to hamper countries’ individual performances in the ranks. In advance of the COP21 climate talks in Paris in December 2015, many national governments will struggle to demonstrate a recent history of leadership in climate change mitigation.
