The prospect of leaving the EU is spreading uncertainty among investors in the UK’s infrastructure, according to a new report from S&P Global Ratings.
In the report, ‘Brexit Is Weakening Investor Appetite For UK Infrastructure Assets. But Not For Long’, Managing Director of Infrastructure Finance Michael Wilkins notes that, while Britain has historically attracted more foreign investment in infrastructure than any other European country – thanks to its stable regulatory environment – the decision to leave the EU has already had an impact on the appetite for assets in the sector. Deals have been delayed, asset sales postponed, and some projects downsized. In fact, UK-based merger and acquisition (M&A) deals in the first half of 2016 were down to $72.9 billion, the lowest level since 2011.
The UK already relies heavily on the private sector to finance its projects, and the likely continued decrease in FDI and EU funding after Brexit will only increase this dependence. With the government having highlighted as much as £483-billion worth of necessary infrastructure investment until 2021, lower enthusiasm from investors will make addressing this demand all the more difficult.
However, Wilkins admits that the long term could see investors finding new opportunities. In an environment of low and negative yields on government bonds, interest could pick up in infrastructure
investment, while the government has set out a “significant infrastructure pipeline” into which investors can tap.
News of the report was picked up in Smart Energy Universe.