News & Analysis

CBI to government: ‘Do more for UK infra investing’

The business lobbying organisation is calling on the UK to credit-enhance greenfield projects, introduce tax incentives, pool pension resources, curtail Solvency II and encourage banks and institutional investors to come up with a shared funding model.

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The Confederation of British Industry (CBI) – a lobbying group and self-styled “voice of business” – has published a report urging the UK government to do more for infrastructure investing, so that institutional investors are left with “An offer they shouldn’t refuse,” as the report is titled.

The prize, as the CBI sees it, is to capture at least 1 percent of the UK’s £1.5 trillion (€1.9 trillion; $2.3 trillion) pension market or a fraction of the global sovereign wealth fund market. 

To accomplish this, the government should consider credit-enhancing greenfield infrastructure projects; leveling the domestic tax regime so that capital allowances are extended to all infrastructure projects; think about “reinstating the dividend tax credit targeted at infrastructure investment” for pension funds; helping pool pension resources beyond the £2 billion Pension Infrastructure Platform; and ensuring that Solvency II doesn’t deter infrastructure investment.

The CBI also called on banks and institutional investors to come up with a shared funding mechanism that could see projects financed through a “secondary debt structure”, a funding vehicle that would receive, from day one, investment from banks to cover the greenfield phase and funds from pensions to cover the operational portion of a project. This would help mitigate refinancing risk for the banks, the CBI argues.

“With banks and institutional investors, including pension funds, working together to find new ways to fund infrastructure development, the government must play its part by removing hurdles, and acting in a more commercial, investment-savvy way,” argued John Cridland, CBI director-general.

According to the CBI, the UK currently ranks 28th out of 142 countries for its infrastructure, lagging behind powerhouses like Germany and China, but also more modest economies like the Czech Republic and Croatia. 

The UK government has, however, pledged to spend £250 billion over the next decade to improve its ageing infrastructure.