Australian groups pledge to invest £28.5bn in UK over next decade

Australian investors have pledged to spend £28.5bn across the UK in clean energy, technology and infrastructure projects over the next decade, the British government said on Wednesday.

Boris Johnson, UK prime minister, met leading Australian businesses, including financial services company Macquarie Group and infrastructure fund IFM Investors, to encourage further investment in the UK to help stimulate an economic recovery as the pandemic subsides.

The £28.5bn consists of a combination of new and previously announced commitments.

Listing a number of wind farms, property developments and new green infrastructure that he claimed the companies wanted to invest in, Johnson said: “This is Global Britain in action — building new partnerships with friends and allies around the globe to create prosperity at home.”

Australian pension funds have been active investors in the UK for decades across large property and infrastructure projects, including the King’s Cross redevelopment in London, as well as water, gas and telecoms.

However, on Wednesday IFM Investors urged the government to do more to attract more foreign capital to the UK.

David Neal, IFM chief executive, has pledged to invest £3bn over the next five years in new net zero projects and to upgrade IFM’s existing UK assets, including the M6 toll road and the Manchester, Stansted and East Midlands airports.

But he said that IFM and foreign pension funds would be willing to do more if the UK government would take a greater share of the risks in developing infrastructure projects and ceded more control over infrastructure projects in return for long-term equity support from offshore partners.

“The key is bringing this to the private sector in a way that is acceptable and creates a good opportunity for our pension funds members,” he said. “There is no point in handing over an equity cheque if you don’t have influence on things like construction.”

Investors in UK infrastructure have been calling for a replacement for the private finance initiative ever since it was scrapped in 2018. But the government has favoured the regulated asset base model, which is used for water companies and airports, to drive forward private sector investment in new projects such as nuclear power plants.

The £28.5bn includes plans by Macquarie for at least £12bn of investment by 2030 in water assets, wind farms and gas networks.

Energy and chemicals group Worley has said that it will expand UK operations with more than 1,000 new jobs in the next 18 months. A similar number of roles are promised by renewable energy company Fortescue Future Industries after it acquired Williams Advanced Engineering in Oxford this month.

However, Mathew Lawrence, director of Common Wealth, a think-tank, argued that essential infrastructure should be publicly owned. “The record of private investors owning vital UK infrastructure has not delivered for consumers, business or the environment,” he said. “Debts have exploded, dividend payments have surged and performance has been patchy.”

The pledges come amid a recent wave of international transactions for UK infrastructure, which provide a guaranteed long-term stable income backed by the government.

National Grid on Sunday sold a 60 per cent stake in its UK gas transmission business to a consortium of investors in Australia and North America, led by Macquarie. Danish energy company Ørsted on Monday sold a 50 per cent stake in its proposed Hornsea 2 wind farm development to French bank Crédit Agricole and insurer Axa in a £3bn deal.

Macquarie is also bidding with private equity group KKR to buy Britain’s largest electricity distributor UK Power Networks from companies controlled by Hong Kong’s billionaire Li family.

Additional reporting by Chris Flood