We asked members of Building’s Funding the Future advisory panel to reflect on the government’s 10-year industry strategy unveiled last week and to share their views on its potential as a means for unlocking the finance to get Britain building
Meliha Duymaz, chief financial officer, Skanska UK, writes…
It is widely acknowledged that critical national infrastructure has been underfunded and under-invested in for quite some time. The government’s 10-year infrastructure strategy positions private finance as a pillar in delivering the UK’s ambitions, but not a panacea to unlocking it on a huge scale. It takes a measured and discerning approach.
The strategy acknowledges that public funding alone is insufficient and sets out a comprehensive framework to attract and deploy private capital. However, it is clear that there is no going back to the PFI (or PF2) models of the 1990s and 2000s.
It is more cautious in describing the scenarios in which PPP might be used than many in the industry were anticipating. It is also quite firm that there will be very limited (if any) scenarios where a PPP model will be adopted for the delivery of social infrastructure where there is no tangible revenue stream associated.
That said, the creation of institutions such as NISTA and the British infrastructure taskforce, and mechanisms like the proposed infrastructure pipeline signal a serious commitment to long-term private sector engagement.
Its breadth and integration across sectors, combined with institutional reforms and new finance models, represent a progressive but cautious shift rather than a transformational one
We believe the strategy will leverage more private cash, not only by virtue of sharing a comprehensive pipeline that has been absent for too long, but also because it outlines multiple deliberate mechanisms for unlocking private capital. These include the Mansion House Accord and pension reforms that aim to unlock over £50bn from UK defined contribution schemes. The National Wealth Fund, the National Housing Bank, and Great British Energy are also structured to bring in private capital through co-investment and guarantees while regulatory reforms and planning certainty will reduce risk and increase investor confidence.
While some elements of the strategy build on existing frameworks, its breadth and integration across sectors, combined with institutional reforms and new finance models, represent more of a progressive but cautious shift than a transformational one. The emphasis on long-term certainty, spatial planning and a visible pipeline will transform how private capital engages with UK infrastructure. The key for investors will be sticking to this approach and maintaining the visible pipeline plan to breed confidence.
While the strategy supports several innovative areas such as for UK pension funds and the National Wealth Fund, the cited private finance (PF) models under consideration (or discounted!) are all familiar to industry. The regulated asset base (RAB) model is well utilised, but its expansion beyond traditional sectors to include hydrogen and potentially transport is welcome. Contracts for difference (CfD) is another model already used in energy infrastructure but, again, the strategy sees potential for expansion to support low-carbon and hydrogen power, while the cap and floor model can be applied to long-duration electricity storage.
The strategy states clearly that PPP models will only be considered in selected investments where future user revenues (ie tolls and fares) will provide support and suitable risk transfer can be achieved (typically lower complexity infrastructure projects). It does say it may consider the mutual investment model (MIM) where better risk allocation and market testing has been performed.
All these models have potential, but their success will depend on effective implementation and risk-sharing and transparent procurement and governance, with consideration for sheltering the market from high and potentially abortive bid costs. There will need to be continued and consistent investor engagement and market testing.
The strategy’s commitment to learning from past failures such as PFI and its emphasis on value for money and innovation also increase the likelihood of success.
While the strategy is clear that it will not return to traditional PFI/PF2, only a very selective use of new PPP models in social infrastructure will be considered where value for money can be demonstrated. Examples might include primary and community health infrastructure, public estate decarbonisation, children’s homes and diagnostic centres
Conversely, the strategy is more ambitious and bold in relation to specific economic infrastructure investments including two schemes that are close to Skanska’s interests (the Euston HS2 station, which will be funded via a PPP, and the Lower Thames Crossing, which is likely to be partly RAB funded.
So the strategy is significant in its direction but measured in its scale, with a focus on tailored risk allocation, market-tested models and transparent governance via NISTA. While the volume of social infrastructure PPPs may remain initially limited, the quality and sustainability of these partnerships could be much improved.
Mark Reynolds, executive chair, Mace Group, and co-chair of the Construction Leadership Council (CLC), writes…
The strategy represents a welcome moment for the UK’s construction industry. Its publication finally sets out a clear and long-term roadmap for national investment – and should in turn allow us in the industry to develop the skills, capacity and delivery capabilities we need to support wider economic growth.
The government has rightly taken its time to develop a delivery-focused strategy which is coherent and aligns with the fiscal constraints that are in place. Once the new dynamic pipeline tool is published later this summer, the sector will have the best visibility of the next decade of construction demand it has had for a very long time.
Once the new dynamic pipeline tool is published later this summer, the sector will have the best visibility of the next decade of construction demand it has had for a very long time
There are some areas that will need more focus. How successfully NISTA embeds itself into the infrastructure ecosystem will be key in realising the ambitions the government has laid out, and the CLC will be working closely with the chief executive Becky Wood and her team over the coming months.
On attracting more private finance into the UK infrastructure market, the detail is helpful but could go further – the strategy does not say as much as it could about how and where private capital will be welcomed into programmes outside the traditional regulated space where private financing is already quite normal. It seems we will have to wait for the Budget int he autumn for that.
More importantly for the construction sector, we need to ensure that where private financing deals are being agreed, they are done in a way that enables the industry to manage risk levels appropriately. As a sector we must now work closely with the government and private funders to ensure that we can deliver on their behalf without taking on undue risk.
Stephen Beechey, group public sector director, Wates Group, writes…
The infrastructure strategy marks a welcome and pragmatic shift in tone on the need for longer-term pipeline planning for both economic and social infrastructure. This, alongside the investment in skills and procurement reforms to empower both supply chain and contractors, is essential to enable industry to invest and plan with confidence to meet future demand.
To contribute most effectively, industry needs consistency, transparency and a genuine seat at the table — and the establishment of NISTA hopefully marks a significant move towards a new era of collaboration.
The commitment to a new generation of public-private partnerships — focused on the right assets, the right partners, and effective oversight — is a step in the right direction
We particularly welcome the strategy’s recognition that public capital alone cannot meet the scale of the UK’s infrastructure ambitions. With around £2 trillion in private capital waiting to be deployed, unlocking that investment is essential to move at the pace required and drive economic growth.
The commitment to a new generation of public-private partnerships — focused on the right assets, the right partners, and effective oversight — is a step in the right direction. Wates has long championed collaborative models like our Alliance Investment Model, which align public outcomes with private investment and shared responsibility to drive long term growth and prosperity.
It is also encouraging to see the Construction Playbook reaffirmed as a foundation for delivery, and the £49bn public estate maintenance backlog acknowledged as a national priority. Wates stands ready to support turning this strategy into reality.
We also welcome the government’s commitment to decarbonising the public estate and accelerating delivery through digital procurement reform and AI-enabled tools — areas where we are actively investing and innovating. The emphasis on skills, resilience and long-term capability building across the supply chain is vital to ensuring that the sector can meet the scale of ambition set out in the strategy.
Beth West, former commercial director of HS2, head of development at Landsec and chief executive of East West Rail, writes…
As someone who has been personally involved in the trials and tribulations of several major/mega-projects and the will they/won’t they proceed question, the publication of the infrastructure strategy is very welcome. I believe passionately in the importance of developing and maintaining infrastructure to improve people’s life chances, so a long-term commitment by this government to deliver infrastructure is a great step forward.
It would be even better if the other national and local political parties also supported this strategy so that we can have real non-partisan commitments to these projects to ensure that they happen – but it will probably remain the responsibility of the projects themselves to build this support.
It is great to see the government reconsidering the use of private finance for projects delivered by the public sector. The regulated utilities (power, water etc) continue to use multiple forms of finance to deliver their projects, and the government should equally consider private finance for its own projects.
The government at every level owns significant property assets and these could be far better leveraged to bring in the private sector – developers and financing – to deliver primary health care as well as schools
As the strategy states, the PPP models first developed in the UK have evolved globally. For bigger projects in particular, the government should look hard at models used elsewhere. Some Canadian PPPs, where the federal government finances one-third, the provincial government one-third and the private sector one-third, are good models to consider for the biggest projects. They create “skin in the game” for all parties involved – an important government commercial priority – and ensure alignment of objectives to get the project delivered.
I also think the government can do more for social infrastructure assets. As I wrote in my recent column for Building, the government at every level owns significant property assets and these could be far better leveraged to bring in the private sector – developers and financing – to deliver primary health care as well as schools.
The government could be far more ambitious if it is willing to look more holistically at its balance sheet and integrating its policy objectives.
But this is all a great start. Let’s go build stuff.
More on Funding the Future
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