M a k in g B u sin e ss S e n se

China Invests West

Can Chinese investment be a game-changer for
UK infrastructure?
A Pinsent Masons Global Infrastructure Sector Strategic Insight Report

M a k in g B u sin e ss S e n se

Pinsent Masons LLP

30 Crown Place
Earl Street
London EC2A 4ES
United Kingdom
+44(0)20 7418 7000

Centre for Economics

and Business Research
4 Bath Street
London EC1V 9DX
United Kingdom
+44(0)20 7324 2850

www.pminfrainvestmentreport.com
Published on 29 October 2014
Copyright:
All rights, including copyright, in the report are owned by Pinsent Masons LLP and the Centre for Economics and Business Research.
Disclaimer:
All information provided in this report is for information purposes only. Although reasonable skill and care has been used in the
reports preparation, no warranty is given as to the accuracy of the information or data it contains. Further, it does not comprise legal
or investment advice, and should not be relied upon for any decision-making purpose whatsoever. Independent professional advice
should be sought before making any investment or like decision in relation to its subject-matter.

Pinsent Masons | China Invests West

Acknowledgements
This report has been prepared and written by a team of experts in infrastructure and
economics, from Pinsent Masons LLP and the Centre for Economics and Business Research.
Pinsent Masons LLP
Graham Robinson, Global Business
Consultant, Pinsent Masons LLP
Centre for Economics and
Business Research
Charles Davis, Director, Centre for
Economics and Business Research
Danae Kyriakopoulou, Economist, Centre
for Economics and Business Research
The team consulted UK and Chinese
business leaders in writing this report,
whom we thank for their views and
opinions.
Martin Gilbert, co-founder and Chief
Executive Officer, Aberdeen Asset
Management
Gershon Cohen, Head of Infrastructure
Funds, Aberdeen Asset Management
Andrew McCaffery, Global Head of
Alternatives, Aberdeen Asset Management

Ian Hawksworth, Chief Executive

Officer, CapCo
Professor Douglas McWilliams,
Executive Chairman, Centre for
Economics and Business Research

Keith Howells, Group Chairman,

Mott MacDonald

Ju Fang, Business Manager, China

Communications Construction Company

Mike McWilliams, Global Head

of Hydropower, Mott MacDonald

Zhen Yang, Investment Department

Assistant Manager, Citic Construction Co

Sir John Armitt CBE, Chairman,

National Express Group

City of London Corporation

Helena Chen, Partner, Pinsent Masons LLP

Tony Bickerstaff, Chief Financial

Officer, Costain

Vincent Connor, Partner, Head of Hong

Kong Office and Head of Sectors, Asia,
Pinsent Masons LLP

Matthew Harris, Divisional

Finance Director, Costain
Sean Latus, Head of Investments, Costain
Mathew Riley, Partner and Global
Head of Infrastructure, Industry and
Utilities, EC Harris
Michael Spencer, Partner, EC Harris
Rob Mansley, Head of Capital Markets,
UK Green Investment Bank

Matt Bennion, Corporate

Development Director, Arcadis

Industrial and Commercial Bank of China

Alan Brookes, Chief Executive

Officer, Arcadis UK

Graham Mather, President,

The Infrastructure Forum

Tim Neal, Global Director,

Buildings, Arcadis

George Wright, Policy Analyst,

The Infrastructure Forum

David Sparrow, Global Director,

Multi-National Clients Program, Arcadis

Dr Geoff Baldwin, Deputy Director,

Infrastructure UK, HM Treasury

Dr Menno Middeldorp, Senior Economist,

Bank of England

Richard Threlfall, UK Head of

Infrastructure, Building and Construction,
KPMG

Wang Wei Bo, Executive Director,

Beijing Construction Engineering Group
International

Richard Reid, London Chairman, KPMG

Tim Roberts, Executive Director and

Head of Offices, The British Land Company
Charles Butters, Director,
British Land Properties

Richard Abel, Managing Director,

Macquarie Infrastructure and Real Assets,
Europe

Anna Stewart, Group Chief Executive

Officer, Laing ORourke
Mark Reynolds, Chief Executive
Officer, Mace Group

Richard Ford, Partner and Head of Planning

and Environment, Pinsent Masons LLP
Jon Hart, Partner, Pinsent Masons LLP
Ian Laing, Partner and Head of Asia,
Pinsent Masons LLP
Richard Laudy, Partner and Sector Head,
Global Infrastructure Sector,
Pinsent Masons LLP
Arthur Lovitt, Partner and Sector Head,
Core Industries and Markets Sector,
Pinsent Masons LLP
Fraser McMillan, Partner and Group Head,
Construction Advisory and Disputes,
Pinsent Masons LLP
Nick Ogden, Partner and Head of Client
Relationships, Global Infrastructure Sector,
Pinsent Masons LLP
Robbie Owen, Partner, Parliamentary Agent
and Head of Infrastructure Planning and
Government Affairs, Pinsent Masons LLP
Michael Watson, Partner and Group
Head, Projects, Pinsent Masons LLP
Ellen Zhang, Partner, Pinsent Masons LLP

Mark Castle, Deputy Chief Operating

Officer, Construction, Mace
3

Foreword
Mr. Diao Chunhe

n recent years, China-United Kingdoms bilateral economic and trade cooperation

has deepened, with strong momentum in infrastructure investment. Both countries signed a
Memorandum of Understanding on Enhancing Cooperation on Infrastructure in 2011. This
framework contributed to establishing the first roundtable conference among British and
Chinese infrastructure business leaders, with the intention of promoting close cooperation in
the infrastructure sector. In June 2014 the Chinese Premier Li Keqiang visited the UK, and
signed a number of governmental and commercial agreements worth over $30 billion in the
sectors of finance, technology, education, energy and infrastructure. This provides a significant
opportunity to build further cooperation between China and the UK.
After decades of progressive development, Chinese enterprises have become an important
global force in the field of international infrastructure investment and construction. Chinese
enterprises have acquired key capabilities and a track-record in airports, railways, water
treatment, offshore wind power, nuclear power plant and other projects. Within the
infrastructure and real estate sectors, Chinese and British enterprises are capable of
complementing one another. Strengthening bilateral exchanges and cooperation would be in
the common interest of both China and the UK, with the potential benefits being far reaching.
To enhance and facilitate large scale cooperation in the infrastructure sector between China
and the UK, and to assist Chinese enterprises to fully understand the UK investment market,
Pinsent Masons LLP, the Centre for Economics and Business Research and CHINCA have
undertaken research and studies in relation to the subject of Chinese Investment in UK
Infrastructure and Real Estate, during which interviews have been conducted with relevant
authorities, financial institutions, real estate developers, contractors and others. The results
are summarised in this report.
The report examines the macro-economic environment, explains the UKs infrastructure need,
gives forecasts of future investment by China in UK infrastructure and real estate and
examines the potential for cooperation between British and Chinese enterprises.
Chinas investment in UK infrastructure is consistent with the increasing demand for UK
infrastructure investment and constitutes the deepening of cooperation between China and
the UK.
We hope that this report provides guidance and a significant point of reference in relation to
mutual cooperation between Chinese and British enterprises in the infrastructure and real
estate sectors.
Mr. Diao Chunhe
President
CHINCA China International Contractors Association

Pinsent Masons | China Invests West

Foreword
T

he sheer scale of investment from China is expected to be a game-changer for UK infrastructure

and could potentially propel Britain back into the global infrastructure premier league.

We expect China to invest over 100 billion into Britains infrastructure over the next decade.

Richard Laudy

This level of investment from China could not only help bring Britains ageing and over utilised
infrastructure up to an international standard, but could also be transformative for the UK
infrastructure sector.
Investment in modern and efficient infrastructure is an essential pillar of economic growth and
prosperity. Without economic arteries, such as Britains roads, railways and airports, as well as the
energy needed to power Britains economy, productivity will deteriorate and the UK will be less
able to compete effectively for access to the worlds fast growing emerging market economies.
Underinvestment over several decades has meant that Britain has a significant accumulated
infrastructure shortfall and is now ranked 27th in the world, according to the World Economic
Forum. There is an urgent need for Britains infrastructure deficit to be addressed.
Britain is a highly attractive infrastructure investment market for China. Our new Global
Infrastructure Investment Attractiveness Index ranks Britain third in the world, after the US and
Japan. But, we gauge that Britain potentially has the edge, presenting a really exciting opportunity.
What sets China apart from many other investors is that China is willing to shoulder construction
risk as a key part of its investment in Britains infrastructure, whereas many other investors are
not. From Chinas perspective, assuming the construction risk gives it an ideal market entry point
for its huge engineering and construction industry and its vast manufacturing supply-chain. It is
clear from our research with business leaders from both the UK and China that strategic alliances
and joint-ventures, bringing together the skills that both nations can provide, are the way forward,
creating opportunities for British companies to work with their Chinese counterparts.
But it is not all plain sailing. Consistency of policy across successive governments, delays in bringing
projects to market, and the challenge of paying for the investment are all difficult questions that
need to be thought through, if we are to benefit fully from the potential scale of investment.
Pinsent Masons is a Global Top 100 international law firm, with offices around the globe. We are
a leader in infrastructure and have been a leading advisor in Asia for over 30 years. Our strong
relationships in the infrastructure field both in the UK and in China have enabled us to bring this
powerful and thought provoking report to you.
I would like to thank the Chinese International Contractors Group as well as the many UK and
Chinese business leaders that contributed their expert views to our study, and also thank the
Centre for Economics and Business Research for providing invaluable support. I would also like to
thank my many colleagues in the Pinsent Masons infrastructure team across the UK and China
who have provided their own market knowledge to the benefit of this report.
We hope our report provides a valuable and clear insight to the opportunities for all involved in
infrastructure investment and development in Britain and China.
Richard Laudy
Sector Head, Global Infrastructure Sector
Pinsent Masons LLP