Chancellor of the Exchequer George Osborne's budget said that the Government would support a formalisation of investment by UK pension funds in UK infrastructure projects.
But infrastructure expert Graham Robinson of Pinsent Masons, the law firm behind Out-Law.com, said that the move would not make a major difference to the way that such projects are funded.
"There was little news in today’s Budget for UK’s beleaguered construction industry," he said. "The announcements on pension funding of UK infrastructure gave only a glimmer of hope. It looks increasingly likely that building and upgrading the UK’s infrastructure will be funded with money from China pouring into the UK."
The Budget Report (114-page / 707KB PDF) said that the Government will continue to support infrastructure investment.
"The Government will support the establishment of a new Pension Infrastructure Platform owned and run by UK pension funds, which will make the first wave of its initial £2 billion investment in UK infrastructure by early 2013," it said. "A separate group of pension fund investors has also presented proposals to the Treasury for increasing pension plan investment in infrastructure in the construction phase."
Robinson said that it was not clear where that investment would come from, except from a combination of infrastructure funds and sovereign wealth funds, including those from China.
"The gap in private investment for UK infrastructure in the UK is massive, something like £150bn over the next five years," he said. "The overall quality of the UK's infrastructure was ranked 28 out of 142 countries in 2011/12 by the World Economic Forum, just behind the Czech Republic. The quality of the UK's roads fared only slightly better and ranked 26 out of 142 countries, just above Croatia."
The Government did announce some infrastructure funding in the budget. It said that it would invest £130 million in a rail scheme in the north of England to improve links between towns and cities there, and said that it would continue to develop a national roads strategy and would carry out a feasibility study into new ways of financing road building and maintenance.