CG/LA Infrastructure's InfraBlog
One of Britain’s biggest insurers, Legal & General, has signalled a £12bn boost to Britain’s economy by declaring that it wants to increase its investment in the nation’s infrastructure from £3bn to £15bn over the next 10 years.
By Andrew Cave 9:30PM BST 03 Aug 2013
Nigel Wilson, chief executive, revealed that L&G wants use some of its billions of pounds of investment funds to support transport and energy projects, housebuilding, property and education as part of a handover of infrastructure investment from banks to insurance companies and pension funds.
Although L&G’s backing will be welcomed by the Government, it will be concerned that Mr Wilson has also come out strongly against the plans for the High Speed 2 fast rail link from London to the North, saying it has “little economic benefit”.
He also opposes London Mayor Boris Johnson’s proposals for a new London airport in the Thames Estuary and says that investment in shale gas technology is unlikely.
L&G has already put £500m into student accommodation, invested in the St George’s Park National Football Centre at Burton Upon Trent and bought 46pc of housebuilder, Cala Group.
“Our focus is on the here and now,” Mr Wilson told The Sunday Telegraph. “It’s fine to have this list of things we can invest in from 2020 and 2025, but we think there’s a need to get on with a number of things now.”
His comments came ahead of L&G’s half-year results this week when analysts expect the insurer to post a 22pc increase in annual revenues to £1.08bn and a rise in operating profits to £582m, from £518m in the same period of 2012.
L&G has plenty of cash to invest, with assets under management of £441bn, more than double the £205bn in 2005.
Mr Wilson said he believes retrenchment among major UK banks is creating “white space and opportunity” for L&G.
“We’ve got about £3bn of investment in infrastructure in the UK, but we probably have up to £15bn to put into UK infrastructure and direct investments from L&G’s annuities portfolio,” he said.
“In the next 10 years it will be the insurers and pension funds that will be funding UK infrastructure investments, rather than the banks.”
Mr Wilson’s opposition to High Speed 2 stems from a belief that its forecast cost, which the Government has recently increased by £10bn to £43bn, does not represent good value for money. “We’re not a big fan of HS2,” he said. “There are lots of other people coming out against that.
“There’s very little economic benefit to it. I wouldn’t spend that amount of money on it. There’s a constant upgrading of the transport infrastructure required in Britain.
“If there’s capital available, you’d be thinking of spending it on building more homes rather than spending £43bn on rail when there’s a desperate shortage of housing.
“If we want to develop the regions then let’s develop regional plans. Just building a slightly improved rail service won’t necessarily do that.”
On London airports, Mr Wilson said he favours a co-ordinated plan to upgrade Gatwick and Stansted and build a third runway for Heathrow. “We’re not a fan of the estuary projects,” he said. “We would like to see all three London airports upgraded in time and to have a co-ordinated plan across the South East between
Heathrow, Gatwick and Stansted.
“Heathrow is the hub and we would be in favour of a third runway.”