New Year, New Hope
As we enter 2017, much of the talk from the infrastructure industry here in London is around one small sentence in Chancellor Philip Hammond’s first Autumn Statement towards the end of last year.
The prospect of a new pipeline of PF2 projects emerging in the UK has sent tongues wagging, with the perhaps somewhat predictable result that expectations seem to run the whole gamut of possibilities.
For some, the failure to announce any actual projects during the Autumn Statement is yet more confirmation that the government is struggling to build any enthusiasm internally for the PF2 model, meaning we can expect only further delays and little of substance come 8 March and Hammond’s first Budget.
However, for others, the delay has been because the original pipeline was not big enough, with rumours suggesting it could be a much more beefed-up PF2 pipeline that emerges in a couple of months.
Whatever the result, though, it seems to me that it is perhaps best that the industry does not get too fixated on this one area of what is a burgeoning global market.
Seeing PF2 as a symbol of the UK government’s commitment (or lack of) to privately financed infrastructure is fine, but the truth is that even a new pipeline of deals will be nowhere near enough to support the industry that existed around 2006, when dealflow was at its peak. On the one hand, this is good news for the market, because it is nowhere near ready to deal with such a flurry.
But what this also means is that all those in the private sector that are involved in privately financed infrastructure projects will still need to be looking at other countries to see where they can make the most of their abilities and skills.
While Europe may seem like the obvious first port of call, there is actually little work going on in many of the European markets.
As one senior executive at one of the major financial advisers put it before Christmas: “Western Europe is not a strong market for us at the moment.”
He is not alone. When asked about opportunities for 2017, most do not look at Europe, but instead talk of Africa and even Latin America. While these markets may be more difficult from the outset, the fact they are keen to do projects and to organise deals with the private sector means they are forcing their way into investors’ thinking.
“Some of our sterling-based clients are looking at South America, which is something they wouldn’t have done in the past,” says one lawyer.
Over the course of 2016, we frequently reported on the rise of Africa and the opportunities – and challenges – that a number of countries across that continent represent. Our sister publication, P3 Bulletin, has done the same in Latin America.
It may be that 2017 is finally the year that some of those challenges are met.