Despite receiving nearly twice as much investment as other parts of England, London has an undeniable need for new infrastructure investment.
Whilst research produced by the Purposeful Finance Commission highlights London’s place as a world-leader in attracting support for projects, attracting average annual investment of £6,058 per person compared to the English average of £3,316, huge disparities across the capital exist. A local authority such as Enfield attracts just £1,636 per person on the same measure, for example, scoring well below the national average.
More widely, many Londoners face an uphill struggle to find a home to live in, our train networks have suffered from years of underinvestment, and congestion remains an issue throughout the city. At the forefront of the capital’s infrastructure challenge is the centrepiece of Labour’s growth agenda: housing. The UK also requires significant investment in supporting infrastructure, including grid capacity, power generation and social infrastructure.
The good news is that there’s no shortage of capital ready to invest. Here at PIC, we estimate that, across the UK’s pension and savings system, there is £200 billion of capital poised for deployment in infrastructure projects. Many funds have taken out long-term debts to support new investments, and so are seeking sizeable projects with stable, long-term returns to service those liabilities. This puts them in alignment with the government’s objectives for the pension sector.
The bad news is that we have a significant shortage of investable projects. This is partly due to a BANANA (build absolutely nothing anywhere near anything) mindset across the UK economy. Underappreciation of the social value generated by major projects amongst those living near to them is also a factor, with resistance to developments often fuelled by narrow regulatory remits.
Regeneration initiatives contribute immensely to local communities – creating skilled jobs, apprenticeships, improved healthcare outcomes, and economic boosts for local businesses. Communicating these benefits effectively is key to overcoming opposition and unlocking the full potential of new infrastructure projects. More must be done to help local authorities bring forward these initiatives.
Given the current constraints on government finances, we believe there is a need for a new era of public-private partnerships, which would see more public and private funding and expertise brought together to deliver vital projects.
We put this philosophy into action in 2021 when we completed an investment with the London Borough of Bromley to help alleviate local emergency homelessness. The £67 million deal was used to purchase around 250 affordable properties, significantly reducing the Council’s cost of emergency accommodation. This innovative funding concept is now a key part of LBB’s Housing and Homelessness strategy.
Elsewhere, in Kingston upon Thames in 2023, we have invested £50 million to develop 125 affordable and shared ownership homes (CGI pictured). The development was made possible with support from the Mayor of London’s Affordable Housing Programme, and delivered in partnership with London Square Group.
One-third of the apartments will have rents set according to the Mayor of London’s criteria for genuine affordability and will be let to local residents who are most in need. The remaining apartments will be shared ownership homes. This will enable many medium income households to gather the deposit needed for homeownership in an environment where doing so is incredibly challenging, even with a stable job. Construction is now underway, and the development is expected to complete in autumn 2025.
We at PIC have now invested more than £13 billion into infrastructure projects across the UK, and £2.7 billion in social housing, student accommodation, and urban regeneration across London. These investments generate substantial social value, benefiting communities across the capital, as well as stable returns for the pension savers who benefit from our portfolios.
The new government should now do more to enable this kind of mobilisation of long-term savings to support housing and infrastructure development.
What it must avoid, by contrast, is scenarios where government investment delivers projects that could have happened without public support. Instead of crowding-out private investment in this way, public funding should be directed towards projects that are too high-risk for funds and which, when completed, help drive additional private investment.
Getting this balance right is key, and we must be mindful of the competitive aspect at play: leading global cities all around the world are vying to crowd-in investment amid a race to deliver sufficient housing, modernise transport infrastructure and achieve net zero.
It’s only through genuine dialogue and collaboration between the public and private sectors that we can hope to keep pace, and unlock the hundreds of billions of pounds worth of investment that we’ll need over the years ahead.