A range of future finance options, should be considered by the government and industry to ensure a strong future for the sector, according to a new report from the Institution of Civil Engineers (ICE).

The Institution's new publication State of the Nation 2018: Infrastructure Investment (SoN) outlines the need for a full debate about the future of infrastructure funding in the UK.

The report explores opportunities for future investment and opens a conversation about how the nation’s infrastructure can be better funded and financed.  

Some of the report’s key recommendations include:  

• Water Asset Management Periods should be flexible enough to enable the planning and delivery of long-term programmes, which meet future demand caused by demographic and climate changes and enable more effective financial planning.
• The government should give serious consideration to replacing the existing generation of road taxes with a pay as you go model for the busiest roads in England.
• The feasibility of establishing a UK investment bank should be explored as a contingency against a loss of access to low-cost anchor finance from the European Investment Bank and to maintain domestic expertise in infrastructure investment.  
• The National Infrastructure Commission should be placed on a statutory footing in the long-term to ensure its permanence and enhance its ability to give independent expert advice.

Professor Lord Robert Mair, ICE President, said: 

“We face a time when the demands on infrastructure services are changing and increasing, with pressures from population growth, ageing demographics, increasing urbanisation, and resilience issues due to climate change.

"To respond to these in the long-term, and remain globally competitive, we must have an open and robust debate about how to fund our future infrastructure needs – and encouraging private investment must be considered.” 

UK's future infrastructure spend

According to ICE, the need for debate about future infrastructure spending is particularly timely in view of the UK’s future spending trends.

The OECD recommendation is that by 2030, global infrastructure spending should be 3.5% of world annual GDP.

However, the budget for public investment in UK infrastructure between 2020 and 2050 sits at 1.0%-1.2%, with any further investment to come from the private sector. 

The report is emphasising the importance of a healthy mix of public and private investment to ensure a diverse range of financing streams and enable the benefits of delivering socially important infrastructure.  

Industry response to the report

Andy Matthews, Greenfield Director at Infracapital, spoke on behalf of the investment community at the launch of the report and welcomed the conversation the report was starting about the need for private investment in infrastructure and how best this could be achieved.

He supported the recommendation encouraging the government to include more details in the National Infrastructure and Construction Pipeline, saying investors needed to have a clear idea about where the investment opportunities in infrastructure are.

“There is a part for private capital to play in the creation of key national infrastructure, but we’d like to see a succession of projects with more detail included in the pipeline," he said.

He also agreed with the recommendation to place the National Infrastructure Commission on statutory footing in the long-term.

This would, he said, enable it to have more clout with government in planning infrastructure long-term, which in turn would provide the investment community with more certainty around where and when to invest.

Government 'must improve the framework'

David Barwell, UK&I Chief Executive, AECOM, welcomed the recommendations and said AECOM strongly agreed with backing better models for funding of infrastructure where it makes sense to do so for the benefit of the user.

“As partners and investors on the Heathrow Southern Railway proposal, we’re extremely pleased to see the recommendation for the government to reform the way it deals with market-led proposals.

“In order for the government to demonstrate it truly understands and values the importance of such proposals, it must improve the framework, making it easier for the private sector to deliver public infrastructure - with intellectual property protected and a clearly defined path for delivery.

“Despite the complications of doing so, we agree with the ICE that the feasibility of a dedicated UKI infrastructure finance institution needs to be explored.

“The EU’s European Investment Bank has worked for decades to bring private capital into infrastructure projects – but the UK’s membership of the bank could end post-Brexit. The need for new ways to mobilise private capital is even more pressing as Britain prepares to leave the European Union.”

Andy Rose, CEO, Global Infrastructure Investor Association, said the report was relevant at a time when the industry is facing "unprecedented technological changes" and "constrained public finances".

“ICE’s excellent State of the Nation report explores how government and the private sector must work together in partnership to address the funding, financing and delivery models to deliver the high-quality infrastructure needed for future generations," he said.

The report’s findings and recommendations are based on discussions, conversations and workshops with over 150 organisations and professionals. 

Click here to download State of the Nation 2018: Infrastructure Investment