Investing in UK plc: A third way

Investing in UK plc: A third way

Like all economies, the UK needs better infrastructure in order to function more efficiently. It also needs more infrastructure in order to provide more people with essential services.

Author: Andrew Baum, Emeritus Professor, University of Oxford & Chairman of Newcore Capital

The UK faces significant infrastructure challenges, with pressing needs in areas like affordable housing, healthcare, and education, exacerbated by central and local government deficits. With government borrowing at record highs, the new Labour government has announced budget cuts and potential tax rises, highlighting the urgent need for innovative financing solutions.

The proposed solution encourages private investment in social infrastructure, learning from past initiatives like the Private Finance Initiative (PFI), which faced criticism for high costs and misaligned interests. The Mutual Investment Model (MIM) from the Welsh Government offers a fresh approach, allowing private partners to build and maintain public assets in exchange for long-term fees, but risks repeating past mistakes.

To effectively tap into private investment, this thought piece advocates for initiatives like the Mansion House Compact to channel institutional investment toward social infrastructure, which can address critical needs such as housing. Institutional investors, particularly local government pension schemes, could play a pivotal role by funding affordable housing and other necessary services, aligning financial returns with community benefits.

The piece looks at examples of successful partnerships, such as Newcore’s acquisition and refurbishment of childcare properties, demonstrating how social infrastructure investments can yield attractive returns while meeting community needs. Furthermore, it emphasises the importance of responsible management of these investments, suggesting a focus on impact-oriented firms, such as B Corporations, which prioritise social and environmental outcomes alongside financial returns. The aim is to foster partnerships between capital providers and managers with shared social purposes, ultimately ensuring that investments yield both financial and community benefits.

Read the full report here.