Will 2025 be the start of an infrastructure revolution?

The UK needs financing on an unprecedented scale to transform our economy. Not only do we need to replace aging buildings and networks, but we also need to upgrade and enhance our energy network and find ways of tackling the effects of climate change – by Harry Hartigan

 
The scale of the challenge should not be underestimated. As Vanessa Havard-Williams, Chair of the Transition Market Finance Review described it: “The industrial revolution needed to deliver the energy transition is a one in two-hundred-year event.”

Failure to invest is simply not an option – which is good news for those looking to add infrastructure assets to their investment portfolio.

Here, Phil Kent, Investment Adviser to GCP Infrastructure Investments Limited, discusses how the government is looking to support infrastructure investments over the next decade and beyond, and how private investors have a huge part to play in the infrastructure revolution.
 

How the government is prioritising infrastructure investments

 
It’s fair to say that energy transition and net zero is a top priority for Keir Starmer’s labor government. It featured prominently in the election manifesto – second only to UK growth – and featured heavily in the International Investment Summit in October 2024.

At that event, the Prime Minster was keen to highlight the £63 billion the government had secured in financing to support renewable energy, infrastructure and technology projects. He also lambasted the current regulatory environment as being too complex and pledged to get rid of the “anti-growth regulation that is delaying infrastructure projects in the UK today”.

“Where it’s stopping us building the homes, the data centres, the warehouses, grid connectors or roads, train lines, you name it, then mark my words, we will get rid of it,” he said. Having already lifted the de facto ban on onshore wind just days into his new post, the early signs are encouraging.
 

Making the UK a clean energy superpower

 
There have been other subsequent commitments from the government. In her first Autumn Budget, Chancellor Rachel Reeves announced £5bn for 1.5m new homes by the end of the parliament, £1.4bn to rebuild schools, £1.2bn to deliver extra prison services and £1.6bn for transport.

There was also mention of making the UK “a clean energy superpower”. Pledges included £8bn for carbon capture, usage and storage infrastructure, including 11 green hydrogen projects; £2.7bn was committed to continue the development of Sizewell C; there was support for four new electrolytic hydrogen projects across Scotland and Wales; £200m for electric vehicle charging infrastructure; support for port infrastructure to facilitate floating offshore wind (£134m); a rollout of broadband through Project Gigabit and shared rural networks (£500m); and £125m for GB Energy.

Commitments to hire 300 more planners and work with the National Energy System Operator and Ofgem to accelerate grid connections to unlock development were also welcomed and a commitment to reform relevant National Policy Statements within 12 months recognized the need for planning reform.
 

Are the promises enough?

 
While the Budget commitments are encouraging, they feel somewhat unambitious given the scale of investment needed to deliver on binding obligations in the UK’s sixth carbon budget and the 2030 grid decarbonisation objective.

For example, £125m for GB Energy is small when compared with the c. £65bn needed to deliver on the 140 GW of installed renewable capacity (up from c. 57 GW) committed to as part of labor’s manifesto.

The intentions and implied direction of travel is laudable, but we need the support mechanisms in place quickly, so that we can accelerate investment and make promises become reality.
 

Spring 2025 and an infrastructure revolution

 
At the moment it seems we will have to wait until the Spring of 2025 to get clarity on the government’s 10-year infrastructure strategy and its 2030 Clean Power Action Plan – leaving us less than five years to hit the first targets, and accompanying cries of “all hands on deck”!

The UK has the infrastructure, market and ambition to succeed, but if we don’t want a lack of ambition to be our kryptonite, we’ll need to up our game. The first industrial revolution took 100 years to play out, the second took 65 and the third 40. We’ll have just 25 years for an infrastructure revolution to achieve our 2050 goals.

The OBR – already concerned about the level of government borrowing – would, I assume, like to see most of the funding coming from the private sector. It may be comforted that labor referred to mobilising £3 in private capital for every £1 of public sector capital from the National Wealth Fund, that now incorporates the UK Infrastructure Bank.

Where that private sector capital is going to come from and the specific mechanisms – the enabling factors around planning and legislation and the ultimate revenue support models to make the economics of the underlying technologies work – are still detail that we’ll need to see, but the private sector will indeed have a huge role to play in the coming years.
 

Keep investing and carry on

 
While the scale of the challenge ahead should not be ignored, and the pace at which we need to address it should, in my view, accelerate significantly, what is positive is that there does not appear to have been a winding back on labor’s position of putting the UK energy transition second only to economic growth.

Infrastructure and Net Zero form two of the government’s seven key pillars identified to support the Growth Mission and are recognized as enablers of others. 2025 looks set to kick start a plethora of multi-year opportunities in the infrastructure sector.
 
Published by our friends at:
 

The post Will 2025 be the start of an infrastructure revolution? appeared first on USNewsRank.