In November last year, the Chancellor announced plans to raise £20 billion from pension funds, to help pay for five-hundred building projects; in a bid to prevent the country sliding back into recession.
However, the government’s chief construction advisor, Paul Morrell – who is due to step down later this year – has said the government would need to come up with a guarantee that would underwrite the development risk in new products.
Speaking earlier this week, Mr Morrell said: “I think it’s a pretty common view that there won’t be a barrel-load of funding coming in from pension funds for Greenfield new infrastructure. It’s not their business and I don’t know anyone who thinks it is.
“I’m sure pension funds will come for Brownfield developments – assets that are already built and earning. But with debt-funded projects, it’s a different story. The pension funds don’t like them. It will be a while before there is the £20 billion investment in new infrastructure.”
Last week it was revealed that the Treasury was considering a plan under which banks would agree to underwrite any losses involved in the construction of new infrastructure in exchange for a fixed-fee paid by future project revenues; whilst pension funds have also suggested they will pull together to raise funds to invest in new infrastructure.
So far they have only agreed to set up a fund of £2 billion, which may be launched next year; and Mr Morrell has said that they will need to develop skills to assess projects.
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