Britain struggling to boost investment in infrastructure

Wed Dec 12, 2012 5:39am EST
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By Chris Vellacott

LONDON (Reuters) - Britain, which exported around the world the idea of public infrastructure being financed, built and run with private sector money, is struggling to uphold the model's credibility at home.

Industry insiders cite tricky politics, frozen funding markets, bad press and rising counterparty risks as reasons for private investors not answering a government call for investment in infrastructure.

"The UK is too much of a headache at the moment," said the chief executive of a private equity company specializing in global infrastructure investments, speaking on condition of anonymity.

The sentiment is a setback for Britain, seen as the home of the public-private model which pushed through schemes such as the Channel Tunnel linking England and France with private backing in the 1990s.

The model has since been adopted around the world in countries such as Australia, Canada, Chile and Singapore. These nations now appear more attractive to investors.

This will frustrate the British government, which is working to attract funding from pools of private capital such as pension funds. Last year, it said it was seeking up to 20 billion pounds ($32 billion) from pension funds to back projects from high speed rail lines to power stations.

A recent rebounding of Britain's Private Finance Initiative in early December, dubbed 'PF2', was designed to streamline the model, promising more organized procurement processes for projects and greater transparency.

But the skeptics still abound, saying the obstacles remain formidable despite evident enthusiasm from both government and potential sources of private finance that are keen on infrastructure as an investment.   Continued...

Workers continue to build the new Crossrail transport link at Tottenham Court Road in London in this file photo taken August 30, 2011. REUTERS/Luke MacGregor