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The sheer scale of investment from China is expected to be a game-changer for UK infrastructure and could potentially propel Britain back into the global infrastructure “premier league”. We expect China to invest over £100 billion into Britain’s infrastructure over the next decade.

This level of investment from China could not only help bring Britain’s ageing and over utilised infrastructure up to an international standard, but could also be transformative for the UK infrastructure sector.

Investment in modern and efficient infrastructure is an essential pillar of economic growth and prosperity. Without economic arteries, such as Britain’s roads, railways and airports, as well as the energy needed to power Britain’s economy, productivity will deteriorate and the UK will be less able to compete effectively for access to the world’s fast growing emerging market economies.

Underinvestment over several decades has meant that Britain has a significant accumulated infrastructure shortfall and is now ranked 27th in the world, according to the World Economic Forum. There is an urgent need for Britain’s infrastructure deficit to be addressed.

The UK’s diverse energy sector is likely to see a wave of investment across renewables, conventional power, nuclear and hydrocarbons.  Chinese surplus is huge and it sees the lucrative UK energy market as an ideal investment destination – however the key challenge will be around who pays for it – unfortunately, there is no such thing as free electricity. In order to keep the lights on the nation will need to invest into long-term sustainable sources of energy.

Unlocking Chinese investment could ultimately be a game-changer for the whole of UK economy including people living and working across the nation. This wall of cash is about modernising UK’s ageing infrastructure and ensuring the UK remains an attractive place to live and work.

Over the past few years we have seen China’s role as an investor evolve from making indirect investments through sovereign wealth funds – Chinese businesses are now becoming co-funders, co-developers and co-contractors in major UK infrastructure projects.

Britain is a highly attractive infrastructure investment market for China. Our new Global Infrastructure Investment Attractiveness Index ranks Britain third in the world, after the US and Japan. But, we gauge that Britain potentially has the edge, presenting a really exciting opportunity.

What sets China apart from many other investors is that China is willing to shoulder construction risk as a key part of its investment in Britain’s infrastructure, whereas many other investors are not. From China’s perspective, assuming the construction risk gives it an ideal market entry point for its huge engineering and construction industry and its vast manufacturing supply-chain. It is clear from our research with business leaders from both the UK and China that strategic alliances and joint-ventures, bringing together the skills that both nations can provide, are the way forward, creating opportunities for British companies to work with their Chinese counterparts.

But it is not all plain sailing. Consistency of policy across successive governments, delays in bringing projects to market, and the challenge of paying for the investment are all difficult questions that need to be thought through, if we are to benefit fully from the potential scale of investment.

The flow of investment from China has already started – we expect this to be the beginning of a major trend as a trickle of major Chinese investment turns into a wave over the coming decade.

Key Contacts

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Richard Laudy

Partner

t: + 44 (0) 20 7490 6259
e: richard.laudy