The UK continues to be one of the world’s most attractive destinations for infrastructure investment, according to the CMS Infrastructure Index: ‘A new direction’, which this year ranks 40 jurisdictions in order of infrastructure investment attractiveness according to six key criteria.
CMS commissioned the Index, in conjunction with Inspiratia, to evaluate past trends and to serve as an indicator as to which jurisdictions would be most attractive for future investment and activity.
The UK remains among the most favourable jurisdictions for sustainability and innovation, although its political stability received a low score compared to the top 10 countries, given the uncertainty over Brexit and the lack of a parliamentary majority. The UK therefore ranked 4th in the Index, overtaken by The Netherlands, Canada and Germany, with Brexit and political uncertainty having a considerable impact on the pipeline of projects available. The National Infrastructure Commission (NIC) is already warning of significant challenges unless there is stronger, strategic planning around infrastructure – challenges that Brexit compounds.
The Netherlands claimed top spot overall, despite a prolonged period with no government at all, after seeing the highest GDP growth since 2007, expected to reach 3.3 per cent in 2017. The country’s success was in part down to its transparent and efficient procurement process, and its healthy multi-billion Euro pipeline in road and water Public – Private – Partnerships (PPP’s). Other countries in the top five included Canada, Germany and Australia.
European countries have bounced back after a period of stagnation. Quantitative easing, the Juncker Plan and EIB support have all contributed to accelerated levels of EU infrastructure spending in recent years, and with economies such as Czech Republic and Romania experiencing significant expansion, there is room for optimism for future investment.
Europe as a whole has experienced an upsurge in infrastructure investment, as many politicians have been willing to use infrastructure investment as an economic stimulant. As well as the Netherlands and the UK, Germany, Norway and France ranked highly in the study, particularly for innovation. In Germany, all dominant parties have placed their support behind PPPs, and it is expected that deal flow, particularly in large – scale transport PPPs, will stay the course.
Maybe unsurprisingly, the UK struggled to hold on to the top spot it gained in a study conducted by law firm Nabarro in 2015. The impact of Brexit and general political instability (as referred to above) is already starting to have an impact on infrastructure investments.Those operating across the sector are clearly looking for commitment and long-term policy from government to allay fears. The report highlights in particular the lack of consensus over infrastructure mega-projects such as a third Heathrow runway and HS2.
Lord Adonis, Chairman of the UK’s National Infrastructure Association, says: “While the UK remains an attractive market for infrastructure investors, it runs the risk of falling behind other nations. Swift decision-making on mega-projects, greater emphasis on smaller projects and a commitment to investment in tech utilities which will drive our economy for generations to come are essential components for a successful infrastructure strategy.”
CMS partner and Co-head of Infrastructure & Project Finance, Kristy Duane, says: “From China’s Belt & Road to the UK’s Brexit bump in the road, politics and policy remain central to shaping infrastructure investment flows globally. If governments are to attract the apparent wave of private capital available, they should look to countries like The Netherlands and Canada for inspiration where transparency and a clear strategic vision for infrastructure shapes the agenda.
“The CMS Infrastructure Index charts interesting shifts in the attractiveness of 40 countries across the globe and also highlights changes occurring in the infrastructure asset class bringing a new wave of innovation to a market long dependent on standardised PPPs for much of its deal flow. The quest for deals has already prompted the industry to explore less mature sectors such as energy storage, broadband, smart meters, as well as student accommodation and rolling stock. It is fascinating to see which countries are leading the way.”
In the Americas, Canada leads the way whilst a lack of detail on Trump’s proposed USD1trillion US infrastructure project leaves the US lagging behind in 7th position. Notably, the Canadian Government are to launch the Canadian Infrastructure Bank in 2017, providing a boost to the already reliable infrastructure market.
In other regions MENA has succeeded in looking at alternatives to combat ongoing low oil prices. UAE and Saudi Arabia have shown a keen interest in renewables; UAE have already played a pioneering role in exploiting their high levels of solar irradiation, while Saudi Arabia’s recent commitment to clean energy is hailed as a game changer for the regional pipeline.
Elsewhere, the 2013 China Belt & Road initiative is delivering an investment boom in Asia. Given the longevity of this project, changes in the balance of infrastructure investment in the region are likely to be profound.
The report also highlights potential new emerging asset classes including 4G, Charging Stations, Car Parks, and the likely impact of technology, which is already revolutionising infrastructure. One example is the rise of smart roads and smart cities, thanks to the interaction of road sensors, fibre optic networks, interconnected self-driving vehicles and inductive charging roads, laying the foundations for a new generation of self-charging and self-driving electric vehicles. Cities like Dubai and Singapore are already making strides to lead the next wave of digital innovation.
