Laying the foundations: Financing the next decade of UK infrastructure development

Victoria Whitehead, Head of Infrastructure and Transport

Laying the foundations: Financing the next decade of UK infrastructure development

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From modern transport links through to robust renewable energy networks and powerful digital highways, future-ready infrastructure will form the backbone of the UK’s future economy. Investment in such infrastructure is an engine of growth, and therefore a strategic priority for the UK government both in the short and long term. With Lloyds being the number one finance provider of UK infrastructure in terms of value¹, Victoria Whitehead, Head of Infrastructure and Transport, Lloyds Corporate & Institutional, looks at the private investment opportunities being unlocked.

Victoria Whitehead,
Head of Infrastructure and Transport,
Lloyds Corporate & Institutional

Top of the agenda

After decades of underinvestment, UK infrastructure is being seen by the government as a fundamental economic catalyst – where targeted investment can directly translate into growth. The focus on infrastructure transcends economics, also offering significant societal benefits. Infrastructure projects create jobs in construction and supply chains, stimulate local economies, and help support regional growth by enabling regeneration in areas that can be underserved by public and private capital.

Additionally, investment in green infrastructure will be intrinsic to achieving the UK’s legally-binding Net Zero targets by 2050, ranging from electric vehicle charging networks to zero-emission public transportation. Green investment isn’t simply a climate solution; it’s also an industrial opportunity that will spawn new sectors and encourage growth.

Finally, the benefits of quality UK infrastructure extend beyond our borders, helping to enhance the UK’s global competitiveness and making the country a more attractive destination for business, investment and talent on the world stage.

_{^{1 Data sourced from Inframation as of 2nd Jan 2025. 1st January 2018 – 31st December 2024, by value}}

Strategic synergies

Published on 19th June, the government’s 10 Year Infrastructure Strategy is a holistic and more predictable long-term commitment which includes at least £725 billion of spending over the next decade. It represents a key milestone in the government’s ambition to break with what could be described as an inconsistent, fragmented approach to infrastructure in the past, and sets out a long-term vision for planning, funding and delivery in the UK. There are strong synergies between the Infrastructure Strategy and the government’s Industrial Strategy, both of which aim to align industrial policy with infrastructure planning, climate goals and regional development. By taking a holistic approach, strategically important sectors such as clean energy, advanced manufacturing and digital technology are now being paired with the tailored infrastructure needed to support them, such as updated power grids, smart transport systems, and resilient data networks.

At the heart of realising the ambitions of the Infrastructure Strategy is the establishment of a new central delivery body, the National Infrastructure and Service Transformation Authority (NISTA), which has published – and will iterate – a national pipeline of infrastructure projects. Although it has been reported that the pipeline outlines over 780 projects with a combined value of £530 billion, more than 50% have been published without an associated spend yet – suggesting higher planned spend on infrastructure than is currently captured. Many involve private funding sources, however the funding mix varies dramatically from sector to sector.

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The pipeline is a step forward on the journey towards modernising the UK’s infrastructure, offering the transparency and scale that debt and equity investors, industry players and delivery bodies seek. Success will hinge on credible funding, sustained political and organisational momentum, consistency, improved delivery systems, skill building and effective governance, among other critical factors.

Funding: one size does not fit all

Public spending alone cannot meet the scale of the UK’s infrastructure needs, and as a result the new strategy puts explicit emphasis on the need to ‘crowd in’ private capital, using public investment and commitments as an enabler and de-risking mechanism. We believe that this is an evolution, rather than a revolution, of existing funding models and it’s key that any model ensures proper risk allocation between public and private sectors, with lessons learnt from the past and risks sitting with those best able to manage it.

Public-private partnerships (PPP), previously a backbone of large-scale delivery, may now be under fresh review with the Chancellor stating that the model could be considered for revenue-generating projects. PPPs aim to harness private sector efficiencies through competition, effective risk-sharing, and innovation – drawing on extensive expertise in construction, maintenance and operations.

The government continues to encourage the development of finance models that can attract private investment amid growing international competition for capital.

From a funding perspective, there’s no universal blueprint for success. It should be noted that the most appropriate financing model will depend on the scope of the project and the risks it carries. Large-scale, newsworthy projects – the likes of the Lower Thames Crossing and Euston HS2 Station – will require bespoke or blended funding approaches. Both Regulated Asset Base (RAB) and PPP funding models are being explored for these flagship projects. At the same time, smaller projects can often move faster through simpler, replicable models and when combined, have the potential to also make a large impact.

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There is strong investor demand to finance infrastructure projects with robust risk profiles and strong pools of liquidity to fund them – from bank finance and public debt markets with private credit nestled in between. However, the ability to secure infrastructure finance is predicated on appropriately mitigated construction risk and the quality and certainty of the cash flows attached to the asset, not simply the asset itself. A thriving infrastructure finance market also relies on an attractive, identifiable and consistent pipeline – which NISTA intends to provide.

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^{All lending is subject to status.}

Building the road ahead

Delivering on the UK’s infrastructure ambitions will not be easy, and there remain a number of significant hurdles to contend with. The UK’s planning environment is improving but often still challenging in places. Judicial reviews, fragmented procurement and supply chain bottlenecks all contribute to delays and cost overruns. Investment in sector-wide skills, supply chain resilience, and rigorous contract management will also be vital to successful outcomes.

The UK has committed to a greener, more connected and resilient future, and by investing in infrastructure fit for tomorrow, it is laying the foundations to realise this vision. As the leading finance provider of UK infrastructure (in terms of value) since 2018, Lloyds plays a key role in bringing projects to fruition through our expert contribution to UK government strategic taskforces, including the British Infrastructure Taskforce.

Our team can offer tailored expertise alongside multi-product debt financing, financial advisory, and risk management solutions across infrastructure, energy, transportation and digital sectors. We are focused on our role not only as a financier, but also as a key strategic partner to the government in delivering the investment aims for the renewal of the UK’s infrastructure.

The coming decade is of critical importance in terms of transforming the UK into a connected, competitive and sustainable nation, but it also represents the biggest opportunity to support sustained, resilient and more inclusive economic growth.

We believe that this is an evolution, rather than a revolution, of existing funding models and it’s key that any model ensures proper risk allocation between public and private sectors, with lessons learnt from the past and risks sitting with those best able to manage it.

Victoria Whitehead,
Head of Infrastructure and Transport,
Lloyds Corporate & Institutional

^{Financing UK infrastructure}^|^{Embracing blockchain}^|^{Longevity risk}^|^{Accelerating digital trade}^|^{Implementing AI}

Key takeaways

The UK government’s new Infrastructure Strategy sets out a long-term vision for project planning, funding and delivery, and unlocks new opportunities for investment.
Private capital is increasingly essential for meeting the UK's infrastructure needs, with public investment serving as an enabler and in some cases a risk mitigator.
Improving planning processes, developing sector-wide skills, and building resilient supply chains are crucial for overcoming major delivery hurdles and unlocking growth.
As the number one finance provider of UK infrastructure in terms of value¹, Lloyds offers multi-product tailored expertise and solutions, supporting economic and societal development.

_{^{1 Inframation as of 2nd January 2025. Data: 1st January 2018 – 31st December 2024, by value}}