Investment must double to £400bn for UK to reach net zero

Private investment will be critical to increasing spending on infrastructure in power systems, industry and transport, says report

For the UK to reach its net zero target, £40 billion a year will be needed in infrastructure spending, double current levels.

In a new report by PwC commissioned by the Global Infrastructure Investment Association (GIIA), they suggest that significant investment will be required to decarbonise over the next decade.

With the country’s finances stretched due to COVID-19, the report – entitled Unlocking Capital for Net Zero Infrastructure – argues that private investment will be critical to increasing spending to the point needed to revolutionise infrastructure in power systems, as well as in buildings and industry, transport and digital.

The UK’s Infrastructure Delivery Plan calls for more than £20 billion of annual private investment in Real Assets sectors including energy.

This can and should be increased to more than £400 billion by 2030 according to the report, pointing to five key recommendations for the UK government to accelerate this.

First is to create a detailed net zero infrastructure roadmap, in order to “create a clear vision for investment in our power networks, buildings and industry, our transport links and digital connectivity,” according to Colin Smith, Infrastructure Deals leader at PwC.

The UK’s Net Zero target is an important marker in addressing the global climate crisis, but reaching this ambitious milestone will require huge sums of investment - both in new technologies and accompanying infrastructure, he continued.

We know the capital and the desire to invest are there, but investors tell us that some of the structures needed to harness this are not. Clear targets will be needed for each asset class and enabling policy frameworks developed to drive confidence and predictability in revenue streams, Smith said.

Secondly, the government should identify and further develop revenue support mechanisms to help drive efficient, timely and scaled roll-out of each net zero asset class. It should also work with private sector investors to deliver increased public/private investment in emerging infrastructure technologies.

PwC highlighted the range of maturity of green infrastructure in the UK as an advantage, but nascent technologies like hydrogen and EV charging are not currently able to attract the low-cost patient capital from the likes of infrastructure funds and pension funds. As such, a framework is needed to attract more low cost capital.

The government should implement best practice in infrastructure funding to further help accelerate investment, and finally it should provide clear strategic policy guidance to regulators to ensure the right balance is structure between customer interests today and in the future.

Lawrence Slade, chief executive officer at the GIIA, said: Private capital stands ready to help turn the UK’s ambitious net zero agenda into reality through the delivery of environmentally and socially responsible infrastructure, but investors need additional clarity from Government around the policy and regulatory framework that will cover these investments.

Slade said, the delivery of a clear and compelling Net Zero infrastructure roadmap is a crucial first step in unlocking the investment needed to decarbonise our economy and ensure a cleaner, greener future.