Regulation and policy turn investors off UK water in the first quarter of the year

Infrastructure investor sentiment towards Europe’s water sector has slumped in the current quarter year with the regulatory regime and political environment named as chief barriers to investment according to a recent survey by the Global Infrastructure Investor Association (GIIA).

In its six monthly poll of investors the UK was largely among the pack in its rating for most of the perceived barriers (see table). But it outstripped the rest on “unattractive regulatory regime” and political instability.

In his foreword to the the association’s Infrastructure Pulse report, published by management consultant Alvarez and Marshall, chief executive of the GIIA, Jon Phillips said “Investor sentiment towards the UK remains inconsistent. Whilst the value of Sterling is lowering asset values for overseas buyers, the UK’s political and regulatory environment is seen as challenging.”

He went on to say the survey revealed “the US, Canada and large parts of northern Europe

emerging as the most desirable investment destinations, whilst the likes of the UK, France and Italy find themselves some way behind.” Respondents scored their outlook for “attractiveness of, and opportunities for, your fund’s infrastructure investment” at a little over 1 for the UK with the Nordics and Germany holding the greatest allure in Europe at around 2 and the US drawing more than 3.

The greatest improvements in investor confidence compared with scores for the final quarter of 2022 were in US and Canada across all the markets and the Nordics remained most attractive European destination. Elsewhere in Europe, Italy; France; and Benelux saw a significant declines in investor sentiment over the same period. On paper the UK appears to have generated an outstanding turnaround in investor confidence since the final quarter of 2022 when it was only marginally above zero. However that period included the six weeks of Liz Truss’ premiership.

Phillips said the level of uncertainty called for policymakers to be “proactive in encouraging private sector investment,” and for “streamlining regulatory processes, improving project pipelines and providing long-term, stable frameworks.”