Sitting on the fence
Infrastructure investors look for political stability, pipeline visibility, and an investor friendly legal/tax environment. Two of those pillars appear wobbly right now. First we have a minority Conservative government beholden to the DUP and its own backbenchers whilst trying to negotiate the most complex divorce in diplomatic history. Secondly, we have an existing somewhat stale construction pipeline coupled with an already oft deferred funnel of PPP projects.
However, we see glimmers of hope. The electorate has signalled its clear frustration with nearly a decade of austerity. This may see a loosening of government spending controls, and as we wrote in the Autumn, we see infrastructure as an obvious potential beneficiary. The need for broader political consensus to move major infrastructure decisions forward may also bode well for greater stability. In particular the Northern Powerhouse seems to have gained an unstoppable momentum and we expect to see some of the enabling schemes or schemes with very strong business cases coming to the market. We are also seeing an emerging trend for impatient stakeholders to put their hand in their pockets or seek other models to fund/finance infrastructure projects – particularly for rail and flood defence schemes.
There is also renewed talk of a softer version of Brexit. What that actually looks like remains to be seen, but if it dampens the economic landing and makes for a more infrastructure friendly environment (easier access to labour, materials and capital) it will give welcome relief.
It will be interesting to see what announcements come out on UK infrastructure investment and the PPP pipeline in the next few months. Although, we're not quite confident enough to call this one. So, like the UK electorate, we'll sit firmly on the fence for now. That said, I think we can all be confident that players in the Northern Ireland infrastructure market are rubbing their hands…