Major investors cite political turbulence as obstacle in infrastructure project progress

Scores of major infrastructure investors believe that massive projects such as Heathrow expansion have become too politicised and have called for the National Infrastructure Commission (NIC) to be granted more powers.

The study which was been carried out by the global law firm DLA Piper examines the challenges and opportunities for the industry over the next five to 10 years through the eyes of infrastructure investors. DLA Piper commissioned the poll of 56 investors with over £1bn invested in infrastructure projects in order to gain a specialised insight into the industry.

Results showed the overwhelming majority (84% of respondents) believed that infrastructure projects had become too politicised, citing Heathrow’s third runway debate as perfect example of how decisions can often take too long and leave the UK behind their European competitors.

The report entitled UK Infrastructure: Defining the Future also found that more than half (55%) think that over-politicisation has a direct effect on the value of proposed projects and seven out of 10 had been deterred from investing due to political concerns.

One big emerging theme from investors to rectify the problem was to grant the NIC with statutory independence. A major frustration was showed to be when major projects are scrapped or significantly altered mid-project leaving many to state the government should be required to identify and formally commit only to projects which have cross-party political support and for it to take on a greater level of completion risk.

While the report raises concerns over politicisation, UK infrastructure investors are broadly optimistic about the future according to the author of the report, with many believing that net returns will increase over the next ten years and that Brexit may provide the opportunity to improve regulation.

Colin Wilson, partner at DLA Piper, said: “There is a lot to be positive about in this report. Long term optimism around UK infrastructure investment is a vote of confidence in the UK economy and its prospects after Brexit. However, investors believe that infrastructure projects are getting bogged down by political wrangling in Westminster and there is a strong sense that major infrastructure projects are too often treated as a political football. It makes sense to grant statutory independence to the National Infrastructure Commission. This would both help to expedite projects as well as provide reassurance to investors that projects are less likely to be scrapped or substantially altered during the development cycle.”

Furthermore, smart cities are also highlighted as a way of harnessing optimal use of interconnected information and communication technologies. Specifically, electric cars and autonomous vehicles were cited as having the biggest impact on UK infrastructure over the next five years. Investors believe that the rail and energy sectors require the most investment, with high-speed rail a priority for the former.

The report comes as the NIC announced the first-ever National Infrastructure Assessment would be unveiled next week on 10 July with its chairman Sir John Armitt saying it would be “a watershed moment” in the delivery of infrastructure in the country. 

The assessment will analyse the UK’s long-term infrastructure needs up to 2050 and make recommendations for meeting them. It will cover issues including transport, water, digital technologies, waste and energy.