Major report finds no improvement in European infrastructure investment

Out-Law News | 01 Dec 2017 | 11:39 am | 1 min. read

Investment in infrastructure has stalled, with no recovery since the global financial crisis, according to a report published by the European Investment Bank (EIB).

The EIB's investment report for 2017/18 (396 page / 8.4MB PDF) said infrastructure investment had stabilised at 1.8% of European Union (EU) gross domestic product (GDP) in 2016, down from 2.2% in 2009. The decline in investment was most marked in countries with lower infrastructure quality.

The EIB said the main driver of the slow-down in investment was fiscal policy choices “biased against long-term capital expenditure”. This was exacerbated by regulatory pressures on allowed returns, which means corporate infrastructure has also struggled to keep up with pre-crisis rates.

Transport infrastructure was the worst-affected by the slow-down and was named as a priority area for investment by firms.

The report recommended re-prioritising public infrastructure investment at all levels of the EU, and paying more attention to innovation and investment in “intangibles”, such as skills and research and development.

The EIB found only half of European municipalities undertook effective strategic analysis for infrastructure investment decisions and a minority took the results of this analysis into account when approving projects.

Although the market for public-private partnerships (PPP) improved in 2016 compared to the previous year, PPP activity is still at historically low levels. Access to finance remained a particular issue.

A group set up in the UK to lobby the government on behalf of the infrastructure industry after the vote to leave the EU said earlier this year the country's relationship with the EIB needed to be clarified, and that the UK should prioritise investment and skills ahead of Brexit.