With just days to go until the UK decides on whether or not to remain in the EU, Michael Wilkins, managing director of infrastructure finance at S&P Global Ratings, writes for leading infrastructure publication, InfraNews, about the likely impact of a ‘Brexit’ on infrastructure investment in the UK. Based on the results of a recent survey of 51 UK and international institutional investors conducted by the ratings company, Wilkins concludes the that the only certainty is uncertainty. According to Wilkins, not only does a potential Brexit threaten the vital flows of EU funding to the UK’s infrastructure market – such as €19.1 billion from the European Investment Bank, and even more from the Juncker Plan’s European Fund for Strategic Investments – it also unnerves investors, with some already curtailing their allocations to the UK.
He goes on to suggest that it is the overseas investors – who currently finance more than two thirds of British infrastructure – that could be hit hardest. This is because a Brexit would likely increase currency volatility. In fact, an overwhelming majority – around 71% – of S&P’s survey respondents said they would be dissuaded from further investment in the UK if the pound was to drop in value.
Wilkins concludes that while most of the UK’s current infrastructure projects and companies could weather the immediate economic turbulence created by an ‘out’ vote, in the long term, indirect effects on creditworthiness could be significant – especially for those tied to the UK’s sovereign rating, which could face a ‘negative outlook’ rating following a Brexit.
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