The UK needs financing on an unprecedented scale to transform our economy. Not only do we need to replace aging buildings and networks, but we also need to upgrade and enhance our energy network and find ways of tackling the effects of climate change.

The scale of the challenge should not be underestimated. As Vanessa Havard-Williams, Chair of the Transition Market Finance Review described it: “The industrial revolution needed to deliver the energy transition is a one in two-hundred-year event.”

Failure to invest is simply not an option – which is good news for those looking to add infrastructure assets to their investment portfolio.

Here, Phil Kent, Investment Adviser to GCP Infrastructure Investments Limited, discusses how the government is looking to support infrastructure investments over the next decade and beyond, and how private investors have a huge part to play in the infrastructure revolution.

How the government is prioritising infrastructure investments

It’s fair to say that energy transition and net zero is a top priority for Keir Starmer’s Labour government. It featured prominently in the election manifesto – second only to UK growth – and featured heavily in the International Investment Summit in October 2024.

At that event, the Prime Minster was keen to highlight the £63 billion the government had secured in financing to support renewable energy, infrastructure and technology projects. He also lambasted the current regulatory environment as being too complex and pledged to get rid of the “anti-growth regulation that is delaying infrastructure projects in the UK today”.

“Where it’s stopping us building the homes, the data centres, the warehouses, grid connectors or roads, train lines, you name it, then mark my words, we will get rid of it,” he said. Having already lifted the de facto ban on onshore wind just days into his new post, the early signs are encouraging.

Making the UK a clean energy superpower

There have been other subsequent commitments from the government. In her first Autumn Budget, Chancellor Rachel Reeves announced £5bn for 1.5m new homes by the end of the parliament, £1.4bn to rebuild schools, £1.2bn to deliver extra prison services and £1.6bn for transport.

There was also mention of making the UK “a clean energy superpower”. Pledges included £8bn for carbon capture, usage and storage infrastructure, including 11 green hydrogen projects; £2.7bn was committed to continue the development of Sizewell C; there was support for four new electrolytic hydrogen projects across Scotland and Wales; £200m for electric vehicle charging infrastructure; support for port infrastructure to facilitate floating offshore wind (£134m); a rollout of broadband through Project Gigabit and shared rural networks (£500m); and £125m for GB Energy.

Commitments to hire 300 more planners and work with the National Energy System Operator and Ofgem to accelerate grid connections to unlock development were also welcomed and a commitment to reform relevant National Policy Statements within 12 months recognised the need for planning reform.

Are the promises enough?

While the Budget commitments are encouraging, they feel somewhat unambitious given the scale of investment needed to deliver on binding obligations in the UK’s sixth carbon budget and the 2030 grid decarbonisation objective.

For example, £125m for GB Energy is small when compared with the c. £65bn needed to deliver on the 140 GW of installed renewable capacity (up from c. 57 GW) committed to as part of Labour’s manifesto.

The intentions and implied direction of travel is laudable, but we need the support mechanisms in place quickly, so that we can accelerate investment and make promises become reality.

Spring 2025 and an infrastructure revolution

At the moment it seems we will have to wait until the Spring of 2025 to get clarity on the government’s 10-year infrastructure strategy and its 2030 Clean Power Action Plan – leaving us less than five years to hit the first targets, and accompanying cries of “all hands on deck”!

The UK has the infrastructure, market and ambition to succeed, but if we don’t want a lack of ambition to be our kryptonite, we’ll need to up our game. The first industrial revolution took 100 years to play out, the second took 65 and the third 40. We’ll have just 25 years for an infrastructure revolution to achieve our 2050 goals.

The OBR – already concerned about the level of government borrowing – would, I assume, like to see most of the funding coming from the private sector. It may be comforted that Labour referred to mobilising £3 in private capital for every £1 of public sector capital from the National Wealth Fund, that now incorporates the UK Infrastructure Bank.

Where that private sector capital is going to come from and the specific mechanisms – the enabling factors around planning and legislation and the ultimate revenue support models to make the economics of the underlying technologies work – are still detail that we’ll need to see, but the private sector will indeed have a huge role to play in the coming years.

Keep investing and carry on

While the scale of the challenge ahead should not be ignored, and the pace at which we need to address it should, in my view, accelerate significantly, what is positive is that there does not appear to have been a winding back on Labour’s position of putting the UK energy transition second only to economic growth.

Infrastructure and Net Zero form two of the government’s seven key pillars identified to support the Growth Mission and are recognised as enablers of others. 2025 looks set to kick start a plethora of multi-year opportunities in the infrastructure sector.

Important Information

This article has been prepared by Gravis Capital Management Limited (the “Investment Adviser“ or “Gravis”) and is for information purposes only. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients of this article outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction and are treated as having represented that they are able to receive this article without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.

This article should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction in the GCP Infrastructure Investments Ltd (the “Company”) or any other fund affiliated with Gravis.  The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities.

No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company, the Investment Adviser or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this article and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions, misstatements, negligence or otherwise for any other communication written or otherwise. In addition, neither the Company or the Investment Adviser undertake any obligation to update or to correct any inaccuracies which may become apparent. The information in this article is subject to updating, completion, revision, further verification and amendment without notice.

Past performance is no guarantee of future performance.

Gravis Capital Management Ltd is authorised and regulated by the Financial Conduct Authority; registered in England and Wales No: 10471852 and its principal place of business is 24 Savile Row, London W1S 2ES.