London mustn’t dither its way into stagnation
Funds that take a long-term view are sitting on an estimated $117bn (£80bn) which they would like to invest into infrastructure projects, including in the UK, according to Andy Rose, the new chief executive of the Global Infrastructure Investor Association (GIIA). Meanwhile, London is hungry for investment into essential services such as housing and transport. So what is preventing both sides from getting together?
Rose says his members, the “creme de la creme” of infrastructure investors, love stability and predictability. Because they are seeking steady returns, they hate change, particularly if foisted upon them after terms have been agreed. A clear pipeline of projects within a solid regulatory framework is therefore highly prized by GIIA’s heavyweight members which include Goldman Sachs, Morgan Stanley, Borealis, and Ontario Teachers’ Pension Plan.
Until recently, the UK was seen as meeting these criteria. A variety of specialist investors have assumed ownership of many services, including airports, energy distributors, and water and sewerage companies.
However, according to a recent report by Deloitte, infrastructure investors looking at Europe now see regulatory risk as particularly high in Iberia and Italy – and the UK. Why? The investors pointed to “the lack of stability and consistency in the regulatory regimes in these jurisdictions”.
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A worrying verdict, given the repeated warnings that a failure to develop our infrastructure will hold back London’s growth. Rose says that despite the risks, his members are “willing and able” to invest once decisions are made. In his view, any initiative which improves commuters’ ability to traverse the capital, however small, should be backed, alongside increasing airport capacity. He says: “It is about making London attractive to people here, and giving international business a reason to come.”
Unless decision makers push on and regulators get a grip, the capital will struggle to grow and retain its status as a hub for global business. The new mayor Sadiq Khan took a bold first step when he removed an obstacle to expansion at London City Airport shortly after taking office. He would do well to build on this strong start by taking further decisions, and to think small as well as big. The capital’s future prosperity depends on it.