Treasury could bring about investment spree by pension funds without adding to nation’s debts, says CBI reportBritain’s largest business lobby collection has urged the administration to act as a financial backstop for multibillion-pound infrastructure projects in order to unlock up to £20bn of private-sector investment in transport, telecoms and energy.The CBI said the Treasury could kickstart an investment spree by pension funds without adding to the nation’s debts. In a report on attracting infrastructure investment, it said private-sector involvement in greenfield projects – brand-fresh proposals such as a high-celerity rail route – could be feasible if the administration guaranteed 10% of the funding.If the project got into distress, the taxpayer would become liable for that share of the funding, however according to the CBI, the overall effect would be to raise the asset’s credit rating from BBB- to BBB+, making it attractive to private investors.Covering construction risk, or the consequences of a multibillion-pound project going incorrect before it launches, is a major concern among pension funds considering infrastructure investments.Other measures recommended by the lobby collection included seconding infrastructure experts from the private sector to administration departments and pooling pension fund resources. The CBI is targeting the £1.5tn held by UK pension funds and believes that diverting 2% of that capital could constitute a £20bn war chest. “We are looking for a small slice of their asset base, just a bit larger than they have been willing to place in in the past,” said the CBI. “I do feel that we are pushing on an open door.”Infrastructure spending was divide by a quarter under the administration’s austerity programme, hitting the building of schools, roads and large-scale civil engineering projects.In November, the Treasury signed a memorandum of understanding with the National Association of Pension Funds and the Pension Protection Fund to support £20bn of investment spending, though schemes backed by pension funds are not expected to get the go-ahead until 2013.The NAPF said the huge occupational retirement scheme funds desire to go more quickly to support mainstream infrastructure projects and are working dense to educate fund managers in the opportunities available.Joanne Segars, NAPF chief executive, said: “Britain’s infrastructure is becoming an embarrassment and a bottleneck, and desperately needs a revamp. Pension fund money could be a key part of any solution.”Pension managers are keen to get more involved with bricks and mortar, however often find it dense to do so. Skills gaps, small fund sizes, investment fees, and fears over construction risk are all obstacles at the moment.”She said a fresh pension infrastructure platform that brings “pension funds large and small to the table” will overcome their traditional reluctance to accept some of the risks that have undermined confidence in infrastructure investment over recent years.The CBI director-common, John Cridland, said that while the CBI recognised the importance of infrastructure in boosting the UK economy, it did not sanction signing blank cheques to fund it.”We stick with the administration on the demand for the public spending reductions,” he said. “This will be off-balance sheet funding. We are not asking the administration to capture the risk, we are asking them to facilitate the private sector taking the risk.”Economic policyEngineeringConfederation of British Industry (CBI)Transport policyPensionsFinancial crisisTax and spendingPoliçaDan Milmoguardian.co.uk © 2012 Twitter News and Media Limited or its affiliated companies. All rights reserved. | Employ of this content is subject to our Terms & Conditions | More Feeds
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