According to the government, infrastructure investment will have a key role to play in the economic recovery from COVID-19 the recovery, both by maintaining jobs in the short term, and creating the conditions for long-term sustainable growth. In the summer, the government brought forward £8.6 billion of capital investment in infrastructure, decarbonisation and maintenance projects. To support the recovery, government investment in economic infrastructure will be £27 billion in 2021-22.
The government is also setting out longer-term settlements for key infrastructure programmes, with record levels of investment in strategic roads, rail, broadband and flood defences. This includes the £5.2 billion the government is planning to invest by 2027 to better protect 336,000 properties and boost resilience of communities to the increased risk of flooding and coastal erosion resulting from climate change.The strategy paper says the investment will reduce national flood risk by up to 11% by 2027 and help to avoid £32 billion of wider economic damages.
Commenting on new water infrastructure, the paper says the government recognises that demand on water supply must be tackled through reducing the amount of water lost through leaks and reducing the volume consumed by customers.
The government is currently exploring the possibility of a statutory target to reduce water demand using powers in the Environment Bill.
Pension funds – “huge opportunity” to support the UK’s infrastructure investment ambitions
The paper also provides more detail about the new UK infrastructure bank the government is establishing to co-invest alongside the private sector in infrastructure projects. The bank, which will operate UK-wide, be based in the north of England. The bank will co-invest alongside private sector investors including banks, institutional investors, sovereign wealth funds, pension funds and global infrastructure investors.The Strategy draws particular attention to the role of pension funds, commenting: “There is a huge opportunity for pension funds to support the UK’s infrastructure investment ambitions.” “The industry anticipates that pension funds and insurers will be able to invest between £150 billion and £190 billion in infrastructure over the next ten years.”
The paper says the government wants the National Infrastructure Bank to work closely with the pension fund and institutional investor market to explore opportunities for a further expansion of pension fund investment in UK infrastructure.
At Budget 2021, the Chancellor will set out comprehensive details regarding the operations, mandate and scale of the bank. The government intends for the bank to be operational in an interim form, from spring 2021.
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