New Year optimism
With the festivities now behind us, and New Year already fading in the memory, the first weeks back at work are often a time to take stock and consider the year ahead.
When it comes to the PPP industry, 2019 is likely to throw up plenty of interesting opportunities, as well as a few familiar stumbling blocks.
And while there will be plenty of headwinds hanging over from 2018, there are reasons to be optimistic.
In the UK, where the market has long thirsted for a new programme of projects, there is the Comprehensive Spending Review, out later this year, which will identify the government’s investment plans over the coming years. But before that, there is the proposed review of infrastructure finance, announced in the Budget when Chancellor Philip Hammond abolished PF2. The outcome of that should give a good indication of what role the government foresees private finance playing in the future of UK infrastructure investment.
Perhaps I’m getting ahead of myself, though. Because overshadowing all this is, of course, Brexit, with all the political fallout that it entails. For all any of us know, the best laid plans of the Conservative Party could mean nothing in a few months, and we may be trying to come to terms with what a Jeremy Corbyn-led government means for the country.
Whatever the outcome, however, one thing is clear: there will still be appetite – and a significant need – for new infrastructure at a local level. Much of that will only be delivered through partnerships with the private sector, and it seems likely that 2019 will continue to see the emergence of the real estate sector in the UK as a prime area for joint ventures and other types of partnerships to blossom. Perhaps a clear indication of that was seen in the government’s Long Term Plan for the NHS, launched earlier this week, which set out plans for extra investment in the health service. With one of the priorities being the transfer of services from hospitals into the community, investment in estates will be a key part of that plan’s successful delivery.
Away from the UK, there are also some good opportunities rearing their heads. Europe may still not have an extensive pipeline, but there are certainly pockets of strong activity. This is being led at present by France, where broadband investment is the order of the day. Like the UK, it is not being led by the central government. PPP is the preferred model of delivery for a number of regions across the country and as a result deals are in the pipeline for a series of significant broadband schemes to boost France’s digital infrastructure.
Indeed, anyone looking for a central-government controlled pipeline in Europe may be somewhat disappointed. Germany also has a number of schemes on the go, particularly in education, but again these are managed not by the federal government but by local and regional authorities.
Beyond that, Spain continues to struggle with its own various political difficulties that have hampered efforts to get its much-anticipated roads programme off the ground, while Norway offers little beyond three road schemes.
Further afield, the Middle East remains a land of potential, as does Africa, but more and more countries like Saudi Arabia and even Kenya are showing signs of maturing into markets where investment opportunities will finally emerge. As one speaker from an African bank said at a conference last year, Africa will emerge as a potent economic force, with or without help from other parts of the world.
Established markets such as Australia and New Zealand will continue to offer new opportunities. The former in particular needs to develop some significant infrastructure solutions to the growing challenges of rapidly increasing populations in its urban areas, while also dealing with the increasing effects of climate change. Meanwhile, the latter continues to press on with using the PPP model for economic infrastructure, meaning there are some chunky projects coming from both countries in the future.
For many of us, of course, all eyes will be on Brexit, at least for the next couple of months. But that does not mean that there are not new opportunities that will emerge despite – and in some cases because – of the UK’s exit from the EU.
That is because, underlying everything, in almost every corner of the globe, is the fact that there is a desperate need for more and improved infrastructure. At the same time, there is not enough money in public coffers to pay to keep up with the demand, meaning private finance solutions – however they may be structured and (importantly in the UK) badged – will remain an integral part of the mix in 2019 and beyond.