With a Brexit now confirmed, Michael Wilkins, Managing Director of Infrastructure Finance Ratings, S&P Global Ratings (S&P), explores the impact on U.K. infrastructure investment in the most recent issue of Infrastructure Outlook – S&P’s monthly newsletter summarising key infrastructure and project finance-related research and rating update news.
In this special edition – published in line with S&P’s recent ‘Infrastructure Finance Seminar 2016’ – Wilkins suggests that despite the inevitable impact of Brexit on short-term investment, the choice to leave the EU could also spark some unexpected activity in the UK. That said, the extent to which the ‘leave’ vote will impact investment largely depends on the outcome of post-Brexit negotiations. From a ratings perspective, however, Wilkins notes that implications are limited, as the majority of infrastructure companies and projects rated by S&P boast highly stable operations and are, therefore, well-positioned to weather the economic consequences, at least in the short term.
However, it is the long-term consequences that the majority of institutional investors are more concerned with. This is the conclusion of a recent survey of 51 investors conducted by S&P. Drawing on the survey’s findings, Wilkins highlights the three main concerns are: reduced funding, depreciation of the pound and changes to policy and regulation. Indeed, these factors could well lead to investors postponing investment, at least until the U.K.-EU relationship has been renegotiated or the economy stabilises.
More positive are the growth prospects for the energy storage sector, discussed in a second prominent feature of the June edition. S&P’s research concludes that considerable declines in electricity generation costs and a growing emphasis on renewable options has led to significant developments in energy storage technology, and therefore both public and private sector involvement.
Productive relationships between the public and private sector also feature as a key solution in modernising U.S. infrastructure. In a separate piece, Doug Peterson, President and CEO, S&P Global Co-Chair, Executive Council on Infrastructure, encourages the establishment of a new model for infrastructure investment, in which he argues increased transparency, better risk allocation and public benefit should be the main targets for infrastructure projects under the new framework.
In other news, S&P has adjusted its ratings for French energy giant EFD, German utility company E.ON and Spanish Power Company Iberdrola S.A., while revising its outlook on Central Nottinghamshire Hospitals bonds.