Increased infrastructure investment would drive economic growth and bolster the U.K.'s competitiveness, according to Standard & Poor’s (S&P).

S&P expects real GDP to grow by 2% to 3% per year over the next several years, yet it estimates that each additional £1 spent on infrastructure in one year (in real terms) would lift real GDP by £1.90 over a three-year period. 

It also projects a strong effect on job creation, with each extra 1% of GDP spent on infrastructure adding over 200,000 jobs in that year.

“The benefits of infrastructure investment do not stop at the short-term boost to output and employment,” said Jean-Michel Six, chief economist for Emea at S&P. 

“Over the longer term, improving infrastructure can enhance the private sector's productivity, for instance, by reducing transport and communication costs. And the resulting economic gains can be significant.”

S&P’s analysis shows that the UK’s current infrastructure investment deficit is at least £60bn, and as much as £200bn if countries with the best infrastructure, such as Switzerland, are used as a benchmark. But, at a time when government debt is rising and the country's fiscal position is constrained, the event’s panel discussion focused on how such investment could be financed.

“Fiscal pressure is likely to constrain the UK government's ability to finance new infrastructure projects,” said Aurelie Hariton-Fardad, director of infrastructure finance ratings at S&P. “We therefore believe that a significant portion of funding for infrastructure investment will come from the private sector.”

“Among European institutional investors, demand is strong and growing – data suggests that by the end of the third quarter this year, as much as $27bn had been raised by infrastructure funds,” said Michael Wilkins, managing director and head of infrastructure at S&P.

Wilkins explained that the rating agency has redesigned its criteria for assessing project finance debt in an attempt to bridge the gap between demand and supply: “Solving this stalemate relies on detailed risk analysis in order to increase transparency on asset performance."

John Llewellyn, partner at Llewelyn Consulting agreed that one of the constraints on investment is the limited number and sporadic nature of projects. He added: “This has been caused by a lack of political commitment to particular projects over the long-term, regulatory instability and fragmentation of the market across different levels of government.”