PENSION funds have agreed to invest £2bn in infrastructure projects by the end of next year, David Cameron announced yesterday, beginning what the government hopes will become a flood of private sector investment.
He told an audience of engineers that the country needs an extra £500bn of investment to update and replace its aging infrastructure, and that the state cannot afford to be the only source of funds.
One possible solution could be to allow firms to build and maintain roads, taking tolls as revenue.
The government had hoped pension funds would be willing to spend at least £20bn on projects including road and energy development, but has had to settle for £2bn for now.
This represents “just a small taste of what I hope will follow if we get this right,” the Prime Minister said, arguing that “over time, investment in good infrastructure can pay for itself.”
Cameron also hinted that all options were still on the table for expanding the UK’s airport capacity.
“I’m not blind to the need to increase airport capacity, particularly in the south-east,” he said.
Infrastructure projects should be a good match for pension funds, which need to generate stable, long-term returns for pensioners, but complex planning rules and a lack of large funds has stifled investment.
As a result, the government is seeking to set up a specific pot into which the funds can put investors’ cash.
Meanwhile, housing minister Grant Shapps yesterday announced an extra £150m will be made available to restart stalled building projects.
The extra cash takes the Get Britain Building fund to a total of £570m which the government hopes will help in the construction of 16,000 homes and support 30,000 jobs.