The vast majority of infrastructure investors active in the UK market believe that a UK exit from the European Union would “zap” infrastructure investment in the two years or more after the referendum.

Rating agency Standard & Poor’s surveyed 51 investors in the UK and abroad – including pension funds, sovereign wealth funds and infrastructure funds – in late-April and found that less than half believe the UK is likely or very likely to leave the EU.

If it does, 71% of respondents said they expected that the overall impact on infrastructure investment would be negative in the two to three years after a vote; 47% believe there would be a negative impact in the three years or more after the referendum.

S&P Global Ratings managing director and head of infrastructure research, Michael Wilkins said: “It is said that perception is reality and, based on what investors are telling us, the reality is that a Brexit scenario could put long-term funding for UK infrastructure at risk.”  

In the short term, infrastructure investors are most worried about currency volatility. About half of respondents cited concerns about macroeconomic turbulence and political instability.

Worries about political instability and macroeconomic turbulence are unlikely to directly impinge on investment, however, and instead cause investors to postpone decisions, said S&P.

It said that its survey suggests this may be only for the short term, however, and that investors that leave the market may “re-enter once they have more visibility or see increased opportunities for higher yields”.

Also, there could be some “unexpected activity” in the market, according to the rating agency, as the flipside to risks from uncertainty “is opportunities for capturing higher returns”.

In a report on the survey, S&P also said funding from the European Investment Bank (EIB) “may be called into question or pared down”.

The EIB yesterday announced it is lending £700m (€890m) for the £4.2bn Thames Tideway Tunnel, a 25km infrastructure scheme and the largest ever undertaken by the UK water industry.

S&P noted that EIB funding to the UK has not stopped since the referendum was announced and that new investment plans continue to be announced. 

“This could suggest that funding may not decline immediately but perhaps when existing committed facilities need to be renewed,” S&P said.

Real Capital Analytics recently said that uncertainty surrounding Brexit was one reason for a 40% decline in European commercial real estate investment in the first quarter of 2016