Last updated: May 9, 2013 8:00 pm

Investor warns on lack of capital to develop UK infrastructure

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One of Britain’s biggest inward investors has warned that not enough private capital is available to achieve the coalition government’s goal of renewing the UK’s power stations, waste plants, roads, ports and airports.

Neil Petroff, chief investment officer of the Ontario Teachers’ Pension Plan, said the UK needed to prioritise a smaller number of infrastructure projects and make sure they achieved competitive rates of return.

The fund has more than £4bn invested in Britain, including in the High Speed 1 rail link, Birmingham and Bristol airports and Camelot, the lottery operator.

Mr Petroff’s warning came as David Cameron said Britain faced a “sink or swim moment” as it fought to retain its position as a leading investment destination in the face of growing international competition.

Speaking on Thursday at a global investment conference in London, the prime minister said the UK would retain its position by keeping taxes low, reforming welfare and investing in education.

His comments came as UK Trade and Investment, the trade promotion body, released preliminary figures suggesting Britain was turning the corner on inward investment after a difficult time since the recession.

UKTI said the UK won 1,462 projects in 2012-13, up 4 per cent after three years of decline. The number of jobs created or safeguarded was up 45 per cent at 163,489. Of these, 58,170 were new jobs, up 10 per cent.

Mr Cameron said: “This is, if you like, for the west and countries like Britain a sink or swim moment and I am determined that Britain is going to be one of the success stories of this century.”

But Mr Petroff, who also spoke at the conference, told the Financial Times that Britain was up against massive demands for infrastructure finance from countries around the world - and not enough money was available in the “investment universe” for all of them.

He said the UK needed to “give predictability in the investment by guaranteeing loans, giving incentives and making sure those incentives are through not only this government but the next government and the next government”.

Mr Petroff added that investment would go to projects that offered the highest risk-adjusted returns.

The Treasury has prioritised 40 projects from the £310bn national infrastructure plan and launched a £40bn guarantee scheme last July. But business leaders are frustrated by the time it is taking to get programmes moving.

The prime minister also hit out at Conservative “pessimists” demanding immediate withdrawal from the EU. He defended his approach of seeking reform and holding a referendum on membership after 2015 as “logical, sensible, practical”.

Boris Johnson, London mayor, said he supported the strategy of renegotiating the UK’s relationship with the EU but it should be prepared to “walk away” if the terms were not right.

Mr Johnson told the conference that the secret of success for London in the 21st century was “being open to talent from Europe and the rest of the world”. He called for the visa system to be improved as it is “still holding back so many sectors”.

UKTI estimated that last year’s summer of sport including the Olympic Games had delivered an initial £2.5bn boost in foreign direct investment, bringing more than 31,000 jobs.

It said Britain had retained its position as the top European destination for FDI, citing figures from the Financial Times FDI Report 2013 putting it ahead of Germany, Spain and France.

The UN said last July that while the UK had the world’s second largest accumulated stock of FDI by value, it had slipped from second to seventh for inflows since 2007.

Steve Varley, UK chairman of Ernst & Young, the professional services firm, said he was confident that Britain would remain Europe’s leading destination, partly because of the coalition government’s cuts in corporation tax.

He said he knew of 40 multinational companies that were looking at relocating their global or regional headquarters to Britain.

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