One of the world’s biggest Infrastructure investors says the UK is no longer an attractive place to invest due to political upheaval and uncertainty over the direction of government policy.
Australia-based IFM Investors, which is one of the biggest shareholders in Manchester airport and owner of the M6 toll road, said that while it owns a wide range of assets in the UK, it has cooled on making further significant investments in new infrastructure due to the high levels of uncertainty caused by government dysfunction and inefficient planning processes.
“We would love to invest in the UK, and we have significant assets here,” chief strategy officer Luba Nikulina told the Financial Times. “But to make new investments we need to find financially attractive opportunities, but at the moment, there aren’t many.”
She added: “There’s political uncertainty in the US but that’s taken to another degree in the UK. We’ve had four prime ministers in four years.” IFM, which has about $140bn in assets, owns 35.5 per cent of Manchester Airports Group, which also owns London Stansted and East Midlands airports.
Her comments come just days after Prime Minister Rishi Sunak controversially cancelled the northern leg of the high-profile HS2 rail link, the UK’s flagship infrastructure project, citing spiralling costs. He said the subsequent £36bn of savings generated would be recycled into other road, rail and bus projects.
Sunak’s claim that he was taking tough “long-term decisions” in the national interest were rejected by a number of former prime ministers, including ex-Tory premier David Cameron.
Cameron said that by axing a large part of the HS2 project, Sunak had “thrown away 15 years of cross-party consensus, sustained over six administrations, and will make it much harder to build consensus for any future long-term projects”.
However, a spokesman for Sunak said: “The billions of pounds flowing into UK Infrastructure Projects from abroad proves the UK remains one of the best places in the world to invest.
“This week alone, we confirmed £10 billion of investment by the Marubeni Corporation into clean energy projects, which will create thousands of jobs and marks another vote of confidence in British businesses like those made by the US, Singapore and India in recent months.”
Sir Keir Starmer, the Labour opposition leader, this week promised to “bulldoze” Britain’s restrictive planning regime to facilitate the construction of housing and critical infrastructure projects.
Nikulina said UK infrastructure is struggling to attract necessary private investment due to uncertainty over the direction of policy, high costs and labour shortages after Brexit.
“The biggest concern is uncertainty, which is not great for long-term capital,” she said, adding that turnover in certain government departments meant “policymaking is highly uncertain as a result”.
That, she said, makes it difficult for investors to get involved in infrastructure projects, which are long duration, expensive and very vulnerable to changing policy regimes.
The UK government recently pushed back the deadline to ban the sale of new petrol and diesel cars from 2030 to 2035, a decision that she said means “if you invest in electric vehicle charging infrastructure, the risk- return profile starts shifting”. The opposition Labour party has said it would reinstate the 2030 ban if it wins the next general election, but has refused to commit to reversing the government’s decision on HS2.
Nikulina also pointed to the windfall tax levied on energy companies as another potential danger for investors.
The UK is meanwhile facing stiff competition from a turbocharged US market, where subsidies for infrastructure investment as a result of the Inflation Reduction Act are helping make it an attractive destination for investors, she said.
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“What we need is a project that is executable and is competitive on a global basis, and at the moment the US is just pressing ahead so powerfully it’s very difficult for the UK to compete,” she added.
She also blamed a “very slow and inefficient” planning system in the UK, which made it difficult to get new projects off the ground, as well as to adhere to timelines and budgets. Nimbyism has also become an impediment for infrastructure development despite the potential benefits to the UK economy, Nikulina said, pointing to barriers to building new rail links to airports that would increase the transportation of goods outside of London.
However, she added that initiatives such as the Mansion House reforms, an initiative by Chancellor Jeremy Hunt that includes plans to channel pensions savings towards illiquid assets, are giving investors hope.
“While the government is musical chairs, there is at last an understanding that the economy needs more investment,” she said.
