UK Infrastructure Investment at a Crossroads: Balancing Ambition with Fiscal Reality

As the UK government prepares to outline the outcomes of its latest spending review, it faces a critical challenge: how to fund a new wave of infrastructure projects essential to national growth, resilience, and sustainability. From delivering 1.5 million new homes and modernising hospitals and schools to advancing clean energy and digital infrastructure, the scale of investment required is considerable yet public finances remain under tight constraints.

With borrowing options limited, the government is likely to rely on private sector participation. The recent appointment of Geoffrey Spence, a seasoned infrastructure finance expert who advised the Treasury during the last Labour government has renewed speculation that some form of public-private partnership could return. While the Private Finance Initiative (PFI) once played a central role in UK infrastructure delivery, its controversial legacy has left policymakers cautious.

Attention is now turning to alternative models, particularly the Regulated Asset Base (RAB) framework. Already used in major utility projects like Sizewell C and the Thames Tideway Tunnel, RAB allows investors to fund infrastructure with regulated returns, repaid over time by end users. This model has the potential to attract capital at lower costs, but public acceptance may prove challenging especially in the current economic climate, where household budgets are under pressure and any perception of increased charges may face resistance.

Another pressing issue is the management of legacy PFI contracts, many of which are due to expire by 2050. Decisions must be made about the future of critical public assets such as hospitals, schools, and prisons. Whether these return to public control or remain privately operated under new agreements, the transition will require careful planning, transparent governance, and a renewed focus on value for money.

To restore investor confidence and secure long-term commitment, the government must clearly articulate its infrastructure financing strategy. This includes providing regulatory certainty, offering fair risk-sharing mechanisms, and ensuring consistency in policy direction. Without this clarity, the UK risks delaying much-needed projects and missing economic and climate targets.

The forthcoming infrastructure strategy is a pivotal opportunity to define the UK’s approach to delivering modern, sustainable infrastructure. If the government can strike the right balance between public responsibility and private sector engagement, it may succeed in building not just new infrastructure, but also renewed confidence in how the country plans and pays for its future.