China will invest more than £100 billion in Britain’s infrastructure over the next decade in a development described as a “game-changer” for the sector.
A report published by legal firm Pinsent Masons and the Centre for Economics and Business Research (CEBR) found that Britain’s £500bn shopping list of energy, transport and building needs is a prime target for Chinese cash. The North Sea is already seeing investment.
The injection, which will total an estimated £105bn by 2025, is expected to result in a rise in joint ventures such as the existing one between Ineos and PetroChina to run Scotland’s only oil refinery at Grangemouth.
Richard Laudy, head of infrastructure at Pinsent Masons, said: “As the need to modernise the UK’s major infrastructure gets greater by the day, the projected influx of Chinese investment into UK infrastructure will be a welcome boost to the construction industry in particular and UK economy as a whole.
“Our report finds that this level of investment is going to be a game-changer for UK infrastructure. Over recent years we have seen China’s role as an investor evolve from making indirect investments through sovereign wealth funds to Chinese businesses now becoming co-funders, co-developers and co-contractors in major UK infrastructure projects.”
The biggest targets for Chinese capital are likely to be investment in projects including nuclear energy and renewables, such as wind and solar power.
According to the report, Chinese investment in the UK energy sector could exceed £43bn in the next decade, with a further £36bn being pumped into real estate and the transport sector seeing £19bn.
The figures are expected to come on top of money already spent by China in the North Sea, where state-controlled CNOOC paid £9.7bn to acquire Canadian explorer Nexen in 2012. Separately, China’s Sinopec acquired a 49 per cent stake in Talisman Energy’s UK operations. .
Offshore wind farm development and other key renewable power networks are also thought to be targets for Chinese firms, with investment set to pick up “significant pace” in the latter half of the forecast period.
The report also suggests China will want to use its vast domestic manufacturing capacity to export equipment and materials for UK infrastructure and real estate projects where it is providing investment.
This development “is expected to change the landscape of the infrastructure industry in the UK as the Chinese enter the supply chain over the next ten years”.
Four out of five of the world’s largest construction and engineering companies are now Chinese, while China is forecast to outgrow the US and become the world’s largest economy in 2030.
Laudy said: “Although the flow of investment from China has already started, we expect this to be the beginning of a major trend as a trickle of major Chinese investment turns into a wave over the coming decade.”