Insurance industry to invest 25 billion in UK infrastructure as Government publishes new infrastructure plan

The government will tomorrow publish a new National Infrastructure Plan (NIP) containing a pipeline of over £375 billion of planned public and private sector energy, transport, flood defence, waste, water and communications infrastructure up to 2030 and beyond.

The government will tomorrow publish a new National Infrastructure Plan (NIP) containing a pipeline of over £375 billion of planned public and private sector energy, transport, flood defence, waste, water and communications infrastructure up to 2030 and beyond.

It comes on the day that six major insurers announced plans to collectively invest £25 billion in UK infrastructure over the next five years. Much of this investment could go into the pipeline projects published today.

The decision follows the successful negotiation last week by UK government of the key European directive Solvency II. The UK negotiations ensured those capital rules incentivised life insurers to invest in a wider range of assets including infrastructure projects which can deliver the consistent long term returns these businesses seek.

The National Infrastructure Plan published today provides the visibility and improved certainty industry has been looking for to commit to big investments. The Infrastructure Pipeline published alongside the plan is the most comprehensive overview of planned and potential UK infrastructure investment ever produced. 

The future looking pipeline enhances visibility and certainty for investors and the supply chain, and allows government to work more effectively to ensure that the UK’s infrastructure needs are met. It also acts as a prospectus for investors, identifying key UK private and public sector infrastructure opportunities up to 2030 and beyond.

Building on the announcement at the Spending Round 2013 of £100 billion of capital investment in specific infrastructure projects, the government will also announce tomorrow that it will:

• sign an agreement with Hitachi and Horizon to support the financing of the development of a new nuclear power station at Wylfa in North Wales through a UK guarantee, subject to final due diligence and ministerial approval
• provide a further £50 million for a full redevelopment of the railway station at Gatwick Airport
• confirm strike prices for renewable energy, so that energy providers know how much they will receive for electricity generated in the future
• take forward steps to convert public sector car fleets to electric vehicles investing £5 million in a pilot during 2014-15
• fund improvements to the A50 around Uttoxeter starting no later than 2015/16
• confirm that there will be no tolling on the planned A14 scheme between Cambridge and Huntingdon, construction of which is planned to start in 2016
• confirm that a UK guarantee has now been agreed for the £1 billion Northern Line extension to Battersea, unlocking a development the size of the Olympics in the Nine Elms area
• announce a £8.8 million guarantee for new energy efficient lighting systems across NCP car parks in the UK
• create a new court for infrastructure to avoid unnecessary delays in the planning process for major projects

• open a £10 million competitive fund in early 2014 to test innovative solutions to deliver superfast broadband services to the most difficult to reach areas of the UK. Options may include enhanced mobile services, new fixed technologies and alternative approaches to structuring financial support, working closely with the communications industry  

• build on the Spending Round commitment of £2.3 billion capital investment for flood defences by developing a new long-term plan, including naming key projects by  Autumn Statement 2014
• The target for the sale of corporate and financial assets will be doubled from £10 billion to £20 billion between 2014 and 2020, including the Government’s shareholding in Eurostar
• The government will also look at options to bring private capital into the Green Investment Bank to enable it to operate more freely in delivering its objectives

Danny Alexander will say:

“The announcement today that six major insurers will invest £25 billion over the next five years is a massive vote of confidence in the UK economy. It supports the wider £100 billion public investment to rebuild Britain over the next seven years that I announced at the Spending Round 2013. Underground, overground, on shore, offshore, wired or wireless, tarmac or train track. You name it, we’re building it right now.”

“This is great news for the people of the UK because after years of neglect, the UK’s energy, road, rail, flood defence, communications and water infrastructure needs renewal. It will boost the UK economy creating jobs and making it easier to do business. It will also make the UK a better place to live for everyone who calls it their home.”

Lord Deighton said:

“The 4th National Infrastructure Plan shows that the government is delivering on infrastructure, with a long term strategy to make sure the UK tackles decades of underinvestment and gives us the infrastructure we need to compete in the global race.

“Investment is increasing to around £375 billion over the coming years, with 45 per cent of our prospective infrastructure already under construction. We’ve set out government priorities with clear delivery milestones and reformed planning rules to drive forward the most important projects, making sure we are building the strong, modern economy of the future.”

 

Otto Thoresen, Director General, Association of British Insurers, said:

“Insurers have a key role to play in contributing to the UK’s economic growth, as providers of long-term capital investment. Providing capital for infrastructure projects will help drive a competitive, healthy and resilient UK economy.”

The future infrastructure pipeline, which only includes projects and programmes worth over £50 million, shows that planned investment in infrastructure has increased to over £375 billion from £309 billion last year. Of the 646 projects and programmes in the updated pipeline 291 are already under construction.

Sector	Overall Value
Communications	14,395
Energy	218,996
Flood	3,959
Intellectual Capital	855
Transport	121,439
Waste	2,304
Water	15,195
Total	377,144

 

Delivery

Since 2010, there has been major progress delivering infrastructure funded through a combination of public and private investment:

• 36 transport projects worth over £1.7 billion have been completed, including 9 Highways Agency major projects covering 360 lane kilometres and 27 Local Authority major projects around the country;
• 353 flood and coastal erosion schemes have been completed, improving the standard of protection to over 112,700 homes;
• government has funded the roll out of superfast broadband which has reached  over 140,000 premises so far, with 10,000 additional premises being passed per week
• Network Rail has completed major station upgrades including King’s Cross station, as part of the Control Period 4 programme of investment which has already delivered upgrades to 150 different stations across the UK;
• working in partnership with universities and industry, the government has invested in large research facility projects worth nearly £500 million including Diamond Phase II, the Royal Research Ship Discovery replacement , Halley VI Research Station, a laboratory for Molecular Biology in Cambridge as well as major investments in existing research facilities such as a £10 million investment in the Daresbury Science and Innovation Campus;
• major upgrades to the London Underground have been completed including the Jubilee Line signalling and Victoria Line upgrades (now one of the highest frequency lines in the UK allowing the Victoria Line to carry 10,000 more passengers an hour), Farringdon ticket hall, new investment in hydrogen hybrid buses and installation of 1,300 electrical vehicle charging points

The government has also supported significant private sector investment, providing the policy framework and creating the right delivery environment to enable:

• completion of the London Gateway port and logistics park upgrade, providing 2,700 metres of quay, six deep-water berths, 24 giant quay cranes and an annual capacity of 3.5 million TEU[^[1] Twenty-foot Equivalent Unit – a measure of container handling capacity.1];
• 80 different electricity generation schemes owned by major generators have been completed since 2010, providing over 13,500MW of electricity, enough to power over 14 million homes annually;
• two new electricity transmission projects are complete, increasing transfer capacity in rural areas of Northern Scotland and two gas storage projects in North Yorkshire and Cheshire have been completed; and
• there have been upgrades at Heathrow and Gatwick, which are both currently undertaking significant investment programmes, worth £5.5 billion and £900 million respectively, as well as Manchester International Airport. Additionally, Birmingham Airport is extending the runway by 350 metres connecting the West Midlands to even more international routes

It also shows that, in addition to the programme of capital spending set out at the start of this Parliament, at the 2011 and 2012 Autumn Statements:

• the government prioritised and brought forward capital investment on a total of 27 road, rail and flood defence schemes;
• 99% of these schemes are on track according to the timetables set at the time of announcement;

two of these schemes, and a further 11 individual projects, have completed as planned and a further 38 individual projects are in construction.