The Government is looking to the private sector to invest four-fifths of the £40-50 billion per year needed to develop the infrastructure for growth and will use Infrastructure UK and the Green Investment Bank to help create the right conditions for that investment.
The Department for Business, Innovation and Skills (BIS) this week published the Government's growth strategy, which emphasises the need for private sector investment in infrastructure and in particular the transition to a greener and more sustainable economy. Unveiling the strategy, Vince Cable highlighted the need for "smarter" use of public money and said that the Green Investment Bank (GIB) ( see previous article) was one way of using seedcorn capital from the public sector to leverage in private investment. He also underlined the need for intervention to allow alternative sources of investment from capital markets and institutional investors to provide a wider funding base and reduce reliance on banks, saying "We want to connect the supply of capital with the demand for capital."
The investment needs referred to in the strategy echo the Treasury figures published in March in the Strategy for National Infrastructure report, which forecast the potential future demand for infrastructure until 2030. The Government believes this level of investment is necessary to meet the needs of the energy sector and the development of green technologies, as well as the demands of population growth.
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The Government is looking to the private sector to invest four-fifths of the £40-50 billion per year needed to develop the infrastructure for growth and will use Infrastructure UK and the Green Investment Bank to help create the right conditions for that investment.
The Department for Business, Innovation and Skills (BIS) last week published the Government's growth strategy, which emphasises the need for private sector investment in infrastructure and in particular the transition to a greener and more sustainable economy. Unveiling the strategy, Vince Cable highlighted the need for "smarter" use of public money and said that the Green Investment Bank (GIB) ( see previous article) was one way of using seedcorn capital from the public sector to leverage in private investment. He also underlined the need for intervention to allow alternative sources of investment from capital markets and institutional investors to provide a wider funding base and reduce reliance on banks, saying "We want to connect the supply of capital with the demand for capital."
The investment needs referred to in the strategy echo the Treasury figures published in March in the Strategy for National Infrastructure report, which forecast the potential future demand for infrastructure until 2030. The Government believes this level of investment is necessary to meet the needs of the energy sector and the development of green technologies, as well as the demands of population growth.
The strategy acknowledges the importance of investment in capital in driving growth and the role of government in supporting private investment in key infrastructure, such as better transport links, green energy and waste. Infrastructure UK (IUK) and the National Infrastructure Plan, which will be published in the autumn and will set out a long-term strategy for national infrastructure and promote policy certainty, are described as "a vital component" of the Government's approach.
Other themes of the strategy include the need to respond to the challenges of a low-carbon economy and to ensure varied and sustained sources of finance for private investment. The increase in the cost of PFI financing during the credit crunch, due to lack of liquidity in the market and an inability to access the capital markets, is noted. The report states that PFI projects nevertheless provide value for money and continue to cut across a wider range of asset classes, hinting that PFI will continue to be important in the future.
The report will be followed by a number of initiatives from BIS designed to foster and encourage growth and a cross Government White Paper will follow later in the year. There is clearly some way to go to put flesh on the bones of the growth strategy, and it will be interesting to see how the relationship between IUK and the GIB develops. Those in the infrastructure industry, already awaiting details of the GIB and the National Infrastructure Plan, have the summer to take stock in the hope that there will be real action in the autumn.
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The original publication date for this article was 26/07/2010.
