A new dawn for UK infrastructure: capitalising on opportunity amid a new political landscape

10 minute read

Philip Kent

CEO, Member of the Investment Committee

The UK’s new political landscape looks set to kick-start a number of opportunities for infrastructure investors. Labour has set its sights on ambitious targets, with decarbonising the electricity grid by 2030, and achieving net zero by 2050 at the forefront of the party’s agenda. Early steps, like the creation of Mission Control led by Chris Stark, and the establishment of Great British Energy, signal a strong commitment to achieving these objectives.

One notable highlight is the recent success of the sixth auction round under the Contracts for Difference (CfD) mechanism, which saw over 9GW of new capacity awarded across sectors such as offshore wind, solar PV (photovoltaics), and tidal stream energy. This competitive process demonstrated a return to significant capacity delivery, especially when compared to prior auction rounds that underperformed. The resurgence signals the potential for rapid advancements in renewable energy deployment.

The countdown is on: just five years to transform UK energy

The path to decarbonisation will not be without its obstacles. Over the next five years, the UK’s infrastructure sector faces immense pressure to ramp up development, especially if it aims to meet the 2030 grid decarbonisation deadline. Encouragingly, the foundations for growth, such as hydrogen and carbon removal business models, have already being laid. The UK is also exploring the role of biomethane in achieving decarbonisation targets across electricity, heat and transport. This breadth of focus suggests that the UK could become a pivotal investment hub for decarbonisation, backed by new government revenue support models.

Two significant headwinds

One of the more pressing concerns for infrastructure investors, however, lies in the ongoing paradigm shift in interest rates. Infrastructure has long been valued for its stable, reliable income, making it attractive during periods of low interest rates. As rates have risen significantly over the past few years, the sector’s relative appeal has diminished. While infrastructure investments have continued to deliver on their promise of non-correlated, sustainable income, the high-rate environment has been a considerable headwind. Investors and stakeholders now eagerly await a further reduction in rates, which would reinvigorate the sector’s allure.

Additionally, the issue of double counting of UK listed investment company costs continues to be another challenge. The perception of extra layered costs has, in some cases, driven investors away. Addressing these concerns will be crucial for restoring confidence and attracting investors back to the sector. You can read more detail on Baroness Sharon Bowles’s new Private Members’ Bill, which aims to resolve this issue here.

Charging toward a greener future

Despite these hurdles, opportunities abound. The biomethane sector is ripe for investment, and Gravis’s leadership in anaerobic digestion, which dates back to 2013, I believe positions us well to capitalise on this growing market. Similarly, new ventures in decarbonising agriculture and sustainable packaging present exciting prospects. The government’s support for these initiatives, paired with innovative market mechanisms, lays a strong foundation for future growth.

You can hear all about Phil's thoughts in the video below.

Outlook for the infrastructure sector

Important Information

This article and video have been prepared by Gravis Capital Management Limited (the "Investment Adviser“ or “Gravis”) and is for information purposes only.

This article and video is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients of this article outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction and are treated as having represented that they are able to receive this article without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.​

This article and video should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction in the GCP Infrastructure Investments Ltd (the “Company”) or any other fund affiliated with Gravis.  The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities.​

No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company, the Investment Adviser or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this article and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions, misstatements, negligence or otherwise for any other communication written or otherwise. In addition, neither the Company or the Investment Adviser undertake any obligation to update or to correct any inaccuracies which may become apparent. The information in this article is subject to updating, completion, revision, further verification and amendment without notice.​

Past performance is no guarantee of future performance.

Gravis Capital Management Ltd is authorised and regulated by the Financial Conduct Authority; and its principal place of business is 24 Savile Row, London W1S 2ES.​

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