PwC responds to Rachel Reeves growth speech

Rachel Taylor, government and health industries leader at PwC UK, said: 

“With business leaders seeing reforms to planning and greater investment in infrastructure among their top priorities to support UK growth and for the foundation of a successful industrial strategy, the Chancellor’s announcements today mark a welcome step towards turbocharging the economy and bringing reassurance to the market. 

“Further levers will be required to increase levels of capital allocation to stimulate investment in much-needed infrastructure, including the UK’s social infrastructure which is characterised by significant backlogs in maintenance and need for replacement.

“Without funding certainty and capital commitment the private sector delivery capabilities are not aligned to delivery of infrastructure at pace with critical constraints on some of the key construction professions and largest contractors who are focussed on opportunities elsewhere. 

“Development of funding models that can unlock private sector capital, alongside government capital commitments, as well as private sector innovation and risk, could stimulate development of critical assets and drive economic growth. This includes demystifying the use of private finance initiatives and learning from successful examples of evolution of the PFI model, such as the Welsh MIM structure. The principles of risk transfer and use of private finance offer an attractive route to expanding spending power if lessons from the past can be learnt and new models are applied in the places where they offer greatest value.”

Matthew Alabaster - Deals Leader of Industry for Energy, Utilities, Resources and Infrastructure at PwC UK, said:

““The Government’s approach is welcomed to tackle the UK’s growth challenge from all sides, including catalysing the supply of capital, showcasing the projects and sectors that need it, and seeking to reclaim the UK’s reputation as an attractive investment destination.

"There is no silver bullet that will address the scale of the UK’s investment gap, which has become ingrained in the UK economy over the last decade. We estimate a shortfall of £130bn of investment per annum just to get the UK back to the G7 average - adding up to over £1trn of missing investment over the last decade.

“The priority sectors in particular are a critical component of demonstrating to global investors that the UK is not just a low-risk investment jurisdiction (though that is of fundamental importance) but also a place for innovation, growth and exports.

“Many more such initiatives covering all angles will be needed over a sustained period to re-establish the UK as the natural destination for the world’s largest and most strategic investors.”

Gareth Henty, Head of Pensions, PwC UK, said:

“The Chancellor is leaving no stone unturned in her pursuit of economic growth, and it is no surprise that Rachel Reeves is looking to unlock our estimated £330bn of surplus currently trapped in defined benefit (DB) pension schemes.

“Allowing DB schemes with surplus assets to deploy funds beyond their immediate obligations could certainly provide a level of the required investment for infrastructure, innovation, and broader economic growth.

“But, if the Government’s proposals are going to work, as well as tackling the fundamental issue of whether pension schemes’ trustees have the power to pay surplus assets to employers, they will need to tackle the more fundamental issues of why trustees should pursue these strategies.  

“In particular, the proposals will need to think about how to address pension scheme trustees’ concerns that a strong funding position today could become a weak funding position tomorrow.  The big question is whether, in pursuit of economic growth, the Government or PPF can underpin or provide any support for taking that risk.”