Posted by James McNeile, Partner
On 1 September 2016 Withy King LLP merged with Royds LLP. The trading name for the merged firm is Royds Withy King. All content produced prior to this date will remain in the name of the firms pre-merger.
What price infrastructure now?
You will recall that these Updates have expressed some scepticism over the prospect of pension schemes investing in infrastructure projects, even after the setting-up of the “Pensions Infrastructure Platform”, or PIP, in March 2012. (The pensions world loves its acronyms).
The problem is that PIP is at present too small and too inflexible to appeal to the majority of pension funds. Ten large pension funds, including Lloyds Bank and the Railways Pension Scheme, have signed up, but only £2 billion of the proposed £120 billion has so far been paid over, and the deployment of the money to the projects has been delayed again.
Critics are talking of requiring Government guarantees before funds will regard the investment as safe. Some are even saying that the Government should turn PIP into a long-dated gilt, as infrastructure is too illiquid (or “lumpy”) for schemes that need a continuous cash-flow. But while the Government strongly backs PIP, it shows no signs of wanting to take on its not inconsiderable liabilities.
And then to cap it all, Ed Miliband stands up at the Labour Party Annual Conference and says that the next Labour Government will freeze energy prices for 15 months, and Shadow Chancellor Ed Balls says there will be “no blank cheque” for the controversial HS2 high-speed rail line project. Neither of these pronouncements is at all helpful to poor PIP, trying to raise long-term money from pension funds. How can PIP help build new power stations if the Government will not let the power generators make a profit from them? Will HS2 ever be built? In 20 years’ time, when HS2 is completed, will we actually need to travel to Leeds or Manchester – or can we hold a meeting in our London office, with a hologram of our Northern Sales Manager sitting opposite us?
Something tells me I will not be investing in PIP . . . .
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