The U.K.’s largest insurance companies will invest £25 billion ($41 billion) in infrastructure, as the government prepares to update its plan for projects from energy and transport to communications.
The government will today publish a refreshed version of its National Infrastructure Plan, which details public and private-sector projects to 2030 and beyond, worth as much as £375 billion [$614 billion], the Treasury said in an e-mailed statement.
The investment by insurers “is a massive vote of confidence in the U.K. economy,” Treasury Secretary Danny Alexander will say, according to prepared remarks released by the Treasury. “After years of neglect, the U.K.’s energy, road, rail, flood defense, communications and water infrastructure needs renewal. It will boost the U.K. economy, creating jobs and making it easier to do business.”
Legal and General Group Plc, Prudential Plc, Aviva Plc, Standard Life Plc, Friends Life, owned by Resolution Plc, and Scottish Widows have agreed to collectively invest in U.K. infrastructure over the next five years and will work together with the Association of British Insurers.
The announcement will help Prime Minister David Cameron update Britain’s aging infrastructure amid projections that the U.K. is set to overtake Germany as the European Union’s most populous country by 2045. For insurers and pension funds, the investment will help preserve returns in bond holdings that have been eroded by record low interest rates, and to match their long-term liabilities to policyholders.
“We can now accelerate our plans in this asset class,” Legal & General Chief Executive Officer Nigel Wilson said in a statement. “The U.K. needs modern infrastructure to drive growth forward, and investing in the right infrastructure projects delivers for our customers and U.K. Plc.” Legal & General has already invested 3 billion pounds in infrastructure.
Wilson said in an interview in June that Legal & General, the biggest manager of U.K. pension assets, could invest as much as £15 billion [$24.5 billion] in infrastructure if the government revised its planning and energy policies.
New projects to be announced today include an agreement with Hitachi and Horizon to develop a nuclear power plant in Wales, a further £50 million [$82 million] to redevelop the railway station at Gatwick airport and confirmation of a government guarantee on a planned extension of the London Underground’s Northern line, according to the Treasury. The government will also confirm it will not fund the construction of the A14 highway through a toll.
“Insurers have a key role to play in contributing to the U.K.’s economic growth, as providers of long-term capital investment,” Otto Thoresen, the director general of the Association of British Insurers, said in the statement. “Providing capital for infrastructure projects will help drive a competitive, healthy and resilient U.K. economy.”
The commitment from insurers follows an agreement by European politicians in Brussels last month that paved the way for new regulations, known as Solvency II, to make insurance companies safer by 2016. The deal followed 13 years of wrangling between the industry and regulators.
The announcement comes a day before Chancellor of the Exchequer George Osborne presents new fiscal forecasts in his Autumn Statement.
Editors: Alan Crawford, Eddie Buckle