This roundtable discussion brought together senior individuals with extensive experience of infrastructure projects involving both the public and private sectors. They included Treasury officials, investors from pension funds and insurance firms, project managers, consultants, and the chair and members of the IFoA Infrastructure Working Party (IWP). This note summarises the discussion and ends with some agreed recommendations for government. The roundtable was held at Staple Inn Hall, London, on 30 April 2025.
The IFoA convened the discussion with the conviction that there is a clear need for more private sector investment in infrastructure, in the UK and elsewhere, but noting that since 2018, there has not been any kind of public private partnership (PPP) framework in the UK. The discussion built on the IWP’s thought leadership published in September 2024: ‘Public private partnerships – why the time is ripe for a new generation of smarter PPPs to flourish’
There was general agreement at the roundtable that PPPs set up in the right way could make a very useful contribution to future investment in infrastructure projects.
It was noted that actuaries’ expertise in areas such as institutional investment strategy and appraisal of long term cashflows, including risk analysis, could be relevant for those setting up PPPs.
The policy options for infrastructure investment have been high on the political agenda since the Labour government took office in July 2024. Examples of actions in this area include:
If public and private sector parties work together in open constructive partnerships, bringing together the resources, ingenuity and flair of both sides, this is likely to achieve better results than either party could achieve on its own.
For example, the public sector can identify the need for more infrastructure, provide the land and access to utilities, and lead the planning process. The private sector can contribute capital for investment, expertise in project management and risk assessment, and an operational flair based on deep knowledge of business processes and contractors. One vital element that both sides must contribute is a willingness to share at least some of the project risks.
Projects which produce an income from end users are particularly suitable for PPPs, such as a transport system where users pay a fare to travel. However, it is also possible to use a PPP approach for infrastructure which does not have its own income flow, such as schools, hospitals and roads. This can be achieved using financing mechanisms similar to the Private Finance Initiative (PFI) but without the provision of services like cleaning, catering and routine maintenance.
The government tends to consider a PPP approach for projects in regulated sectors such as energy and water. Housing could also become an important PPP area, given the government’s target to build 1.5 million new homes during this parliament.
Investors in infrastructure are generally seeking risk-adjusted returns which are comparable with returns on other kinds of investment. The discussion brought out the wide range of results they might expect, depending, for example, on whether they invest in debt or equity, and at which stage of the project lifecycle.
Investors have not usually wanted to take on construction risks in the past, though new forms of insurance might help them to do so in the future.
Participants from the pensions sector noted that pension funds (including even large funds) may struggle to invest in individual projects because this would require significant governance. It would only be for large projects that this volume of governance would be worthwhile. The solution might be for such funds to aggregate into a pool of investments under a single umbrella. However, this too would be difficult as pension funds have differing risk appetites, levels of expertise and governance arrangements. These variations would make it challenging to bring several funds together to create a pooled infrastructure investment vehicle.
For insurers, the Solvency UK framework requires debt to be investment grade with fixed cash flows. Risks from larger projects that are outside the matching adjustment may require the government to underwrite them.
In terms of the detail of PPP contracts, the discussion touched on recent high inflation rates. This has meant that there have not been fixed price offers in contracts in recent years.
The IFoA’s Infrastructure Working Party proposed a new framework for PPPs in its 2024 ‘think’ piece, ‘Public private partnerships – why the time is ripe for a new generation of smarter PPPs to flourish’
Important components of this approach were:
Participants recognised the importance of public sector guarantees in gaining acceptability for investors. Examples are the regulated asset base, contracts for difference, and National Wealth Fund debt guarantees.
The public sector balance sheet rules could be relevant in designing any new framework.
The roundtable included a valuable presentation from the Welsh Treasury on its experience of managing a PPP known as the Mutual Investment Model (MIM). MIM features the transfer of a number of risks to the private sector, including design, construction, financing, maintenance and lifecycle. This type of model is well understood by the markets.
There was no difficulty raising £1.4 billion of capital for investment in various projects. These include a £600 million road due to complete in May 2025, a major cancer hospital in construction, and several schools at different stages of development. There are ongoing discussions about the potential for a second wave of projects. Contracts are unique to each project and list which party is responsible for each risk.
Projects have largely been delivered on time and on budget. They attribute this success to the discipline that comes from risk transfer. Price and interest rate volatility have been challenging, but it should be possible to price for such risks in future. During project development the input from investors had sometimes improved the project significantly.
It was recognised that institutional investors have a fiduciary duty and that the expected risk and return from investing in infrastructure must compare favourably to alternatives to make the investment viable for further consideration. Investors would normally only consider non-financial goals such as developing community benefits once they have satisfied themselves that their fiduciary objectives have been met.
Some PPP investors are willing to look at forms of impact investing, alongside the commercial case for investing. In the case of the MIM in Wales, contracts reflected several changes to the historic PFI approach, including ethical requirements in relation to supply chains and employment.
If semi-permanent PPPs were established by local or regional authorities in future this could facilitate impact investing in the areas concerned.
We believe that the initiative lies with the government to clarify its policy towards PPPs in its forthcoming 10-year infrastructure strategy, and we recommend that the following points should be taken into account in devising the policy:
We would like to thank all of the participants in the roundtable, and their organisations, for their contributions to a discussion that was rich in ideas and diverse in expertise.
