An increased focus on infrastructure and housing investment by the UK government in its Autumn Statement was largely welcomed today.
A 拢23bn (鈧�27bn) National Productivity Investment Fund and investment in rail, telecoms and housing was announced by UK chancellor Philip Hammond, while a pipeline of PF2 projects is likely to be announced early next year covering economic and social infrastructure.
Merrick Cockell, chairman at the London Pensions Fund Authority, said: 鈥淚t is encouraging the chancellor has identified infrastructure as a priority and will work with the National Infrastructure Commission on a plan.
鈥淭here is no shortage of funds to invest in UK infrastructure. What is lacking are the appropriate assets and the right deals to invest in.鈥�
He said he hoped an economic infrastructure plan would include how to finance such developments and involve potential asset owners, such as UK pension funds, 鈥渞ight from the beginning鈥�.
Vivek Paul, director of client solutions at BlackRock, said Hammond鈥檚 statement suggested a 鈥減otential future role鈥� for the private sector in infrastructure projects.
鈥淎ny increase in the future supply of infrastructure assets accessible to pension funds would be welcome,鈥� he said.
Mercer principal Amarik Ubhi said Hammond鈥檚 approach to infrastructure appears to be 鈥渆volutionary rather than revolutionary鈥�, with a specific focus this time on road congestion and communications infrastructure.
鈥淲e view the Government鈥檚 stated commitment to building out and upgrading the UK鈥檚 infrastructure positively,鈥� Ubhi said.
Michael Wistow, international tax partner at law firm White & Case, said the 拢23bn fund would provide a 鈥渢angible boost鈥� to the economy and could be a 鈥済ame-changer鈥�.
David Curtis, head of UK institutional sales at Goldman Sachs Asset Management, said government investment in infrastructure was 鈥渙ften seen as an attractive investment for pension funds in need of reliable long-term investments鈥�.
He added: 鈥淭he sector certainly does have an important role to play in portfolios, but its value depends on the kind of projects being pursued.鈥�
More 鈥渕odest projects鈥�, such as broadband extensions or improvements to local roads, are not on a 鈥渟ufficient scale鈥� to help pension funds.
鈥淪o we await with interest further detail on the individual projects the government intends to support,鈥� he said.
鈥淚n principle, there should be a positive feedback loop between the UK鈥檚 need for infrastructure and the pensions industry鈥檚 need for assets, but those assets need to offer the cashflows and inflation protection schemes require.鈥�
A dedicated 拢2.3bn housing infrastructure fund for up to 100,000 new homes in high-demand areas, unveiled by Hammond, was welcomed by Melanie Leech, chief executive of the British Property Federation.
Hammond allocated 拢7.2bn to the construction of new homes to 2020-21.
Leech said the 鈥渉idden gem鈥� is the spending on infrastructure to help bring forward housing sites.
鈥淚nfrastructure spending is housing delivery鈥檚 silver bullet, and the considerable commitment to invest about 拢2bn a year is therefore very welcome,鈥� she said.
However, Christopher Mahon, investment manager and director of asset allocation research at , said the chancellor鈥檚 infrastructure plan was 鈥渦pside down鈥�.
鈥淭he UK treasury has already committed eye-watering sums of money to programmes such as HS2, Heathrow & Hinkley that won鈥檛 be completed for another 20 years,鈥� he said.
鈥淏illions upon billions have been promised, with those projects costing 拢56bn, 拢19bn, and 拢18bn, respectively.鈥�
Only 鈥渢oken amounts of money are being spent on practical projects that are needed today, such as easing rail and road bottlenecks鈥�, he said.
The 拢2bn announced today, Mahon said, was 鈥渇ifty times smaller than the amounts committed to the three mega projects alone鈥�.
Leech said an allocation of 拢1.7bn for accelerated construction on public land would also help 鈥渦pscale the modular construction sector, meaning a more efficient industry and the faster delivery of homes鈥�.
Jeremy Blackburn, head of policy at the Royal Institution of Chartered Surveyors, said it had warned the UK treasury that the country was facing a 鈥渃ritical rental shortfall of 1.8m homes鈥�.
However, Hammond did not make an expected announcement on Treasury-backed infrastructure bonds, as promised by Prime Minister Theresa May in July this year.
Berwin Leighton Paisner鈥檚 Mark Richards, said: 鈥淭here was nothing on the much-mooted infrastructure bonds, which was disappointing.鈥�
Chris Cummings, chief executive of the Investment Association, said: 鈥淲e are today giving our formal backing to the development of a UK municipal bond market, which will help local authorities secure much-needed financing to invest in new infrastructure projects and meet their refinancing needs.鈥�
He said the association was launching a position paper outlining its support and highlighting the benefits of municipal bonds for investors, borrowers and the wider economy.
Hammond announced 拢1bn to invest in full-fibre broadband and trialling 5G networks, and five years of business rates relief for new fibre-optic infrastructure, which was welcomed by Deloitte Real Estate鈥檚 head of business rates James Thompson.
鈥淭his will remove one of the major barriers to the rollout of high-speed telecommunications infrastructure,鈥� said Thompson, who explained that the relief would be restricted to 鈥榝ull-fibre鈥� infrastructure 鈥� which interprets as 鈥榝ibre to the property鈥�.
The UK Treasury predicts the value of the relief to rise from 拢10m next year to 拢25m by 2022.
鈥淲e would expect the speed of rollout delivery to be increased as a result of this relief,鈥� Thompson said.
鈥淭his will provide a medium-term benefit and will help grow the business rates tax base in the longer term when the five-year relief has expired.鈥�
Ian Allison, director in business rates at Real Estate, said the pledge, aimed at assisting the chancellor鈥檚 goal of making the UK a leader in 5G, could be subject to EU state aid rules and therefore be worth up to 鈧�200,000 over a three-year period.
鈥淚鈥檓 sure a utility company would be hoping for significantly more relief than this,鈥� he said.
