Global Financial Markets are more open than ever to investing in local infrastructure and redevelopment schemes in the United Kingdom. For the right project, these sources of finance are virtually unlimited, rapidly deployable and can come with the experience and expertise to support delivery. This provides councils with a unique opportunity to unlock their local areas ' potential and raise revenue. However, the infrastructure investment landscape can be a complex for councils to navigate. This guide highlights some of the key opportunities and considerations to help you start this journey.

The UK continues to require increasing levels of investment in infrastructure in the future, reflecting expected population and economic growth, the challenges of climate change, the need to decarbonize the UK’s energy supply, and new opportunities to deliver technological change. In the Infrastructure Finance Review Consultation Paper issued by HM Treasury in March 2019, it was highlighted that of the projected £600 billion infrastructure investment pipeline for the next 10 years, half is forecast to come from the private sector.

Infrastructure plays a critical role to support local communities and the local economy. Infrastructure can unlock an area’s potential, enable residents to access new education, skills, and work opportunities, support local retail and business areas, and increase the viability of new sites for homes and businesses.

The role of local government is changing. New roles and powers for local government have emerged in recent years which make it more viable to access up-front investment for infrastructure that can be repaid or serviced by revenue streams from taxes, services, infrastructure use or enhanced land values.

Foreign Capital Investment (FCI) is a particular source of private investment, which has been successfully used in the past for appropriate infrastructure projects as it typically invests large sums, over long time periods, at stable interest rates to enable the development on infrastructure. It excludes the secondary purchase of existing assets for the purpose of income generation. This report discusses FCI alongside other sources of finance and investment for infrastructure, providing guidance and advice to councils. It is distinct from FDI (Foreign Direct Investment) which refers to investment into business interests.

Successfully engaging with private investors and FCI can not only bring investment but also critical skills and capabilities to support you bringing an infrastructure project on-stream. To have the best chance of success you should consider the Why? How? When? Who? WHY? Why would someone invest in your locality?
Investors will compare investment opportunities on a global basis. For the right investments there is no shortage of available finance. For an investor to regard a local investment opportunity as a serious proposition, they must have long term trust in the governance and capability of the local authority concerned. This needs to be demonstrated by leadership, local vision, political stability and access to managerial and technical capability and capacity.

HOW? How to make the commercial model work?

The investment landscape can be complex. Understanding investors and the type of investments they undertake will lead you to the most appropriate investor. Do you know:

• FCI is often looking for schemes £100 million+.
• Some UK pension funds will look at schemes from £10 million
• Pension funds generally seek for returns over 20 or even 40 years

Investors will be able to work with you on the detailed business model but you need to be clear before you approach them of the type of investment relationship you seek and the appropriate payback mechanisms.

WHEN? When should you talk to potential investors?

Investors can be brought into your project at various stages and through a variety of mechanisms. They can be a useful source of expertise and capacity (people and expertise) and projects can benefit from early engagement. Do you know:

• Passive investors tend to provide finance only, though will likely want to be involved in governance, particularly for significant projects.
•  Active investors will want a hands-on role, providing experience and expertise to shape the project

There is often no need to go through complex procurement processes for investors (as you would delivery partners) as value for money requirements can be satisfied via alternative methods. This can be a complicated area and you should seek advice if you are unsure.

WHO? Who should be involved in the process?

To successfully deliver an infrastructure project, there are a range of skills, capabilities, resources and stakeholders that need to be involved and coordinated. Key partners can include councils, expert advisors, subnational organisations, local or regional transport bodies, and, if seeking FCI, the Department for International Trade. 

Getting the Why, How, When, Who right will dramatically increase your access to these new sources of finance to deliver the new infrastructure you need.