‘Infrastructure Investment Plans: Bold Response to the Crisis Facing UK Infrastructure Financing’

July 18, 2012 /

The UK government’s infrastructure investment plans to boost growth by underwriting £50bn of investment in infrastructure and exports is a “bold response to crisis,” says expert.

Richard Threlfall, KPMG’s UK Head for Infrastructure, Building and Construction, said: “This is a bold response to the crisis facing the financing of UK infrastructure. With bank finance both scarce and expensive, the selective use of Government guarantees puts the UK’s AAA rating to good use and should allow pension and bond finance to be tapped for infrastructure investment. The initiative provides a valuable safety net for projects currently in procurement and should ensure that no well structured project fails for lack of finance over the next few years.”

He noted that the use of the Government guarantee is subject to a number of important conditions and project promoters will be rushing to ensure that their projects qualify.

“Particularly critical is the need to get work started within 12 months of the guarantee being issued. This targets the Government’s support at well developed projects that are already past planning hurdles. What is unclear is how many projects are this well prepared. The guarantee is only available as a last resort, and the risk is that projects spend too long being scrutinised before getting the support they need,” he said.

“If it is applied quickly to a number of projects, the UK Guarantee initiative should provide a valuable boost to the UK economy. Every £1 spent on construction in the UK drives £2.84 in economic benefit. The Government seems to have heard and understood this, and the UK Guarantee should help get Britain building,” Threlfall concluded.

 

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