UK - Pension schemes could be asked to fund the UK's high-speed rail network under proposals currently before the transport ministry.
A study co-authored by National Express chairman David Ross and presented to ministers this week claims that a project to link London and Birmingham via a high-speed rail network could cost a relatively modest £6m (€7.1m), compared with previous government consultancy estimates of £15.8-17.4bn.
Under the new proposals, the government would source funding from infrastructure funds, investors and banks. A spokesman for the Department for Transport said ministers were "looking carefully at their options" and that it welcomed the latest proposals as "a contribution to the debate".
The spokesman would not confirm today that the government would seek funding from pension schemes. However, business secretary Vince Cable has long mooted the idea of offering private sector pension funds government bonds linked to transport and social housing.
A command paper published in March by the then Labour government forecast that over the next three decades the UK would "require a step change in transport capacity between its largest and most productive conurbations". The network would initially link London with Birmingham, and thereafter with Manchester, the East Midlands, Sheffield and Leeds. The report left open the issue of funding the estimated £25.5bn cost of the project until the next government spending review. However, it forecast returns from the project of £28.7bn over 60 years.
The proposals now in discussion are likely to win approval from Legal & General chief executive Tim Breedon, who earlier this year proposed the development of a British infrastructure bank that would encourage insurance firms and pension funds to pay for infrastructure projects.
Among those rumoured most likely to be interested in investing in such project are Global Infrastructure Partners (GIP), a joint-venture initially developed by General Electric and Credit Suisse. GIP owns London's City and Gatwick airports - the latter with the involvement of South Korea's US$270bn (€220bn) National Pension Fund.
Planning regulations and higher development costs can make investing in UK infrastructure significantly more expensive than investing in similar projects in mainland Europe. GIP partner Michael McGee said in March that pension funds were now "very, very much more discriminating and discerning in terms of where they're putting their money". (See earlier IPE Real Estate article: Pension funds called on to invest in infrastructure)