Brexit uncertainty takes its toll as UK falls sharply in 2019 CMS Infrastructure Index

The Brexit-effect is taking its toll on the infrastructure sector with the UK slipping five places to ninth position by investment attractiveness, according to the 2019 CMS Infrastructure Index: Bridging Continents.

The latest report by international law firm CMS, in conjunction with inspiratia, analyses data against six criteria to create a guide to the most attractive destinations for infrastructure investment in the world. This year’s report identifies that a pivot point has been reached in the global transition towards greener, smarter and more sustainable investments.
Uncertainty caused by Brexit, together with the Labour Party’s re-nationalisation plans and delays on flagship projects such as Heathrow Airport’s expansion, HS2 and Hinkley Point C, have impacted the UK’s 2019 score. Without Brexit, the UK would place 5th in the global Index.
Nonetheless, the findings show that the UK still offers significant opportunity for infrastructure investors, particularly in M&A. Prime Minister Boris Johnson’s goal for full fibre by 2025 suggests that sizeable investments in fibre infrastructure from the private sector are imminent, while the UK is now securing leadership among G7 economies in the race to decarbonisation through its pledge to reach net zero carbon emissions by 2050. Already the cradle of offshore wind development, driven by the contract for difference auctions – with its third-round results awarding 5.5GW out of 6GW to six offshore wind allocations – the UK is now among the countries spearheading the global transition to subsidy-free renewables.
The UK’s market for rolling stock has also been gathering steam in 2019, according to the report, as investors position themselves for substantial investment opportunities. This includes Greater Anglia, which is embarking on a GBP1.4 billion rollout of 38 bi-mode trains and 20 electric trains and aiming to replace 169 trains by 2020. New fleet deployments is also triggering secondary market activity with investors seeing more value in competitively priced new fleets compared to the refurbishment of existing stock.
The upcoming UK election is set to play a key role in shaping the future of the sector. The two main parties are pledging significant sums to UK infrastructure, with the Conservative Party promising GBP25 billion to improve Britain’s roads and an additional GBP5 billion for ultra-fast broadband into the hardest to reach areas of the country. Meanwhile, the Labour Party has announced plans to set up a national transformation fund to overhaul the UK’s transport links and infrastructure, lifting current government investment spending to over GBP100 billion a year. 
Paul Smith, Co-Head of Infrastructure and Projects Group at CMS, says: “The UK’s fall in the CMS Infrastructure Index comes as no great surprise. Brexit has created political stasis, dominating the political agenda at the expense of other priorities and creating uncertainty over the future of key infrastructure projects. Despite this, as the report highlights, there are plenty of reasons to be optimistic. We are seeing a steady pipeline of projects in some infrastructure sectors, including rolling stock renewals in England and transport in Scotland, as well as a rise in opportunities being created for secondary market investors in rail, airports and energy. And with the two main political parties making infrastructure spending a key battleground in their election promises, we may see a huge boost in investment over the coming years.”
Germany has overtaken the Netherlands to win top spot in the 2019 Index, as it attempts to prioritise sustainability and innovation. Despite some controversy over whether the government is meeting and setting ambitious enough targets, climate action is very much an essential part of the political agenda. As a result, there are clear opportunities associated with projects to support renewable energy and EV infrastructure.
Overall, Europe claims six of the top 10 countries in this year’s Index. The report reveals that the continent has plenty of opportunities in 5G, renewables, and electrification of transport as the race towards sustainability leadership and proactive government policies gather pace.