By Daniel Hunter
Research from international law firm Nabarro has revealed the UK as the most attractive country for infrastructure investment based on results from the Nabarro Infrastructure Index, with Europe dominating the top five.
The index ranks twenty countries representing all five major world regions by their attractiveness to the institutional investor for infrastructure investment. Ranking is based on several factors including the tax environment, availability of credit, legal environment, ease of ‘doing business’ and current activity in the infrastructure market, as well as the positioning of the country in terms of its environmental performance, ecological sustainability and innovation.
The Index ranks the UK as the most attractive environment based on chart-topping sustainability and innovation (93 per cent), one of the highest scores for ‘ease of doing business’ (95 per cent), comparatively strong credit and currency (66 per cent) and a relatively high degree of private sector participation in infrastructure projects (74 per cent).
Despite the positive outlook outlined by the Index, access to infrastructure investment in the UK is not met without challenge. Funding for new projects is limited as a result of the UK government being openly austere in the aftermath of the global financial crisis, presenting a significant barrier to those looking to invest. For the UK infrastructure sector to become a net winner, recent policy initiatives need to be fully implemented for investors to take advantage of the favourable environment on offer.
“Whether investing in upgrading infrastructure assets or in new projects, the global appetite to do so in the UK is very readily apparent. There is a huge pot of money to invest in upgrading assets, which exceeds assets available, but funding for new projects has been particularly challenging," Matthew Jones, partner and head of infrastructure at Nabarro commented.
"Given recent policy initiatives, such as the National Infrastructure Plan of November 2011 and 2013 UK Budget Infrastructure Delivery Update to boost the sector, we may see that the infrastructure sector is a net winner. However the UK needs to make sure it has a favourable enough tax and regulatory environment to maintain its place at the top of the list if it wants to be there next year.”
The results of the Infrastructure Index are no surprise to the UKTI who support the view that the UK is an investment destination for global countries.
Outside of the UK, other European countries dominate the top ranks with France and Germany in 3rd and 5th position respectively. Both scored well in terms of private participation, ease of doing business and credit & stability. Australia and the US featured in 2nd and 4th place respectively.
The European nations also led the way in sustainability and innovation, ranking at the top of this sub index, with the UK 1st followed by Spain, Italy and France in joint 2nd. However, the Eurozone has a polarised performance - Spain (16th) and Italy (14th) did not fare as well in the general index as their other European cousins.
The second largest group of similarly ranked countries in the Index represent the complete list of BRICS Nations — Brazil (7th), Russia (10th), India (8th), China (6th) and South Africa (9th).
“While it is widely agreed that the BRICS nations have massive growth potential, albeit one that is moderating, each one of them has significant regulatory and economic constraints which continue to hamper foreign investment into infrastructure projects, and lower ‘ease of doing business’ rankings," Jones added.
"Brazil is a country to watch though as it has an ambitious $66bn stimulus plan which is a significant commitment to upgrading the country’s infrastructure.”
The MENA countries (Middle East and North Africa) did not manage to achieve any listings in the top half of the Index and are considered high risk for investment by credit rating agencies. However, all the Middle Eastern countries are spending comparatively more on infrastructure than the Europeans, with Qatar allocating 12 per cent of its GDP towards infrastructure spend ahead of hosting the 2022 World Cup. The most attractive in the region was Israel in 11th, followed immediately by UAE 12th and Qatar in 15th.
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