01 / Introduction

The UK has a long and proud history of innovation aimed at attracting private investment into infrastructure: 665 private finance initiative (PFI) schemes with an asset value of over £50bn are in operation, and since privatisation in 1989 the water sector alone has attracted over £200bn in investment at current prices. The contract for difference (CfD) mechanism for offshore wind has attracted a further £90bn.

With an expanding portfolio in energy, the UK has a pipeline of discrete, single-asset programmes, including onshore and offshore wind, battery storage and strategic water assets like reservoirs. These all benefit from different forms of revenue guarantee essential to attract low-cost, patient capital. 

They represent a quite different prospect from PPP schemes with complex service requirements, or the corporate investment opportunities offered by regulated water and power network utilities. In essence, the UK’s offer to investors is a combination of a clear requirement, a credible opportunity to secure the investment return, and protection from some less manageable risks such as demand volumes. In return and due to competitive procurement, the expectation is that finance costs and lifetime running costs will be as low as possible.

Despite the UK’s evident success in attracting capital investment, there are still challenges. The prohibition placed on government-sponsored PPP projects in England in 2018 has restricted investment options, and the recent Cunliffe review has highlighted weaknesses in the water sector’s regulation that has contributed to long-term under‑investment in the asset base.

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