In this edition, we look at the UK Government's 10 year Infrastructure Strategy and whether the "Washington effect" has trumped the "Brussels effect" in relation to ESG regulation. We also provide updates on topics including planning reform, housing, heat networks, national security, pension fund infrastructure investment and carbon markets.
Please get in touch if you would like to discuss any of the issues discussed below.
The UK Government has published its 10 Year Infrastructure Strategy (IS). This 100 page document sets out its key plans for the sector and highlights many of the commitments at the recent Spending Review. As some measures had already been announced in last year's Budget (see our coverage of this in the last issue), this article focusses on what's new.
To put the scale of the Government's plans in context, the IS sets out a headline figure for all infrastructure investment over 10 years of £725 billion. Whilst a significant amount of this public investment had been announced at last year's Budget, the IS attempts to pull together all the Government's infrastructure-related initiatives in one place, in keeping with its strong emphasis on taking a holistic approach. The same thinking also informs the Government's plans to combine the National Infrastructure Commission and the Infrastructure Projects Authority into single body – the National Infrastructure and Service Transformation Authority (NISTA) – also announced at last year's Budget (see section 5 of the last issue).
Alongside public investment of £725 billion, the IS sets out the scale of the private investment that is likely to be required, as illustrated by the examples highlighted below.
Projected levels of private investment: examples
This underlines how the Government's efforts to "crowd in" private capital will be critical to the its success in delivering the new infrastructure and cleaner energy system envisaged by the IS.
The IS summarises the Government's approach to delivering a clean power system by 2030 and reaching net zero – for discussion of the key elements of its policy and their achievability, see section 3 of the last issue. New measures announced as part of the IS and/or the Spending Review included the following:
CARBON CAPTURE, USAGE AND STORAGE (CCUS): at last year's Budget, the Government confirmed investments in the HyNet North West cluster and the East Coast Cluster. It has now confirmed support for the Acorn cluster (in Scotland) and the Viking clusters (in the North East), with a final investment decision expected to be taken later this Parliament.
LOW CARBON HYDROGEN: the Government will provide £500 million in funding to support hydrogen infrastructure. The IS also highlights the decision taken as part of the Spring Statement 2025 to remove Climate Change Levy costs from electricity used in electrolysis to produce hydrogen (in recognition of the potential role that hydrogen could play in meeting net zero policy objectives).
NUCLEAR POWER: at last year's Budget, the Government confirmed £2.7 billion of funding for Sizewell C but did not allocate any specific sums to support small modular reactors (SMC). It is now planning to provide £14.2 billion for Sizewell C, £2.5 billion to support the development of SMC and £2.5 billion for nuclear fusion research over the Spending Review period.
However, we are still awaiting announcements/decisions on the following key issues:
The IS highlights Spending Review commitments of £24 billion for UK road network improvements and over £17 billion for urban transport (e.g. buses, trams and urban mass transit systems). This is substantially more than was announced at the Budget last year. As well as confirming support for rail projects announced at the Budget (i.e. the Transpennine Upgrade, East-West Rail and HS2 to Euston), the IS highlights total rail investment of £35.5 billion over the Spending Review period.
On the same day as the IS was published, the Competition and Markets Authority also announced a market study into the civil engineering sector for roads and railways. It appears that the study will focus primarily on ways that the Government could do a better job planning infrastructure and regulating relevant markets; in view of this, businesses active in those markets may want to consider making submissions to the CMA with a view to informing its eventual recommendations.
The Government has committed £2 billion to deliver the AI Opportunities Action Plan published in January 2025. The strategy is based on clusters of AI data centres with enhanced access to energy and planning support, known as AI Growth Zones (the first of which will be in Culham in the Oxford-Cambridge corridor). Although data centres are heavy users of energy and water, they are also expected to bring opportunities to provide low carbon heat for nearby properties – see further section 6 below on heat networks. The Government has also backtracked on its decision at the Budget to cancel funding for a new super-computer at Edinburgh University; it will now provide £750 million to support this project (but this appears to be a lower level of funding than had originally been envisaged – the figure quoted at the Budget was £1.3 billion).
The main new commitments in terms of funding for housing announced at the Spending Review were (i) £39 billion for the Affordable Homes Programme over 10 years; (ii) a 10 year social rent settlement from 2026 at CPI+1%; and (iii) £2.5 billion of low interest loans and access to over £1 billion of government support to accelerate remediation of social housing. A new National Housing Bank has also been established, backed with £16 billion of new financial capacity (on top of £6 billion of existing finance). This is expected to allow Homes England to offer support for SME housebuilders and to support more complex, higher risk developments by taking equity stakes.
As regards net zero policy measures, the Government has allocated £13.2 billion in funding to the Warm Homes Plan to support e.g. purchase of heat pumps, solar and batteries by consumers. Further details are expected to be confirmed later this year. There is, however, still no news on the Future Homes Standard, which will set the energy performance standards that new build housing must meet (although the expectation is still for it to be published later this year). A consultation on use of hydrogen for home heating has also been promised for later this year.
At last year's Budget, the Government committed to provide £200 million in 2025-2026 to accelerate rollout of public charge points for electric vehicles (EVs). The IS states that £400 million will be allocated to support further rollout of charging infrastructure (but provides no more detail) and £200 million by March 2026 to provide charging infrastructure aimed specifically at HGVs. The Government is also promising to allocate £1.4 billion to the Office for Zero Emission Vehicles (OZEV) to fund projects supporting the transition to zero emission vehicles.
Shortly after the IS was issued, the UK also published its Industrial Strategy. As noted above, this provided some more detail on Great British Energy will work. "Clean Energy Industries" were identified as one of the 8 key sectors that the Government has chosen to focus on. This would include wind (onshore, offshore and floating offshore), fusion, nuclear, hydrogen, carbon capture and storage and heat pumps. It would also appear to include electricity network infrastructure. The ambition is to have "at least doubled investment in frontier Clean Energy Industries to over £30 billion per year" by 2035. The document also outlines a range of measures to reduce electricity costs for energy-intensive users and promote investment in clean power infrastructure, including (i) supporting the development of Corporate Power Purchase Agreements a as a means of securing more stable prices; and (ii) exploring a new Market Demand Guarantee to stimulate domestic production of key electricity network equipment. Finally, on the planning front, the Industrial Strategy also contains a commitment to reduce the average pre-application period for major infrastructure projects from two years to 12 months by "scrapping overly burdensome consultation requirements".
The last 6 months have seen unprecedented turbulence in the field of sustainability regulation. The EU, historically a world leader in environmental standards and responsible business conduct, appears to be backtracking on its leading position and fitting in with the political mood in the US – which favours an aggressive programme of deregulation. But a key question – particularly for those working out how to respond to the ever-shifting sands – is whether recent changes reflect a fundamental shift away from sustainability regulation and towards deregulation, or whether this is merely a bump in an otherwise well-defined sustainability road.
In our briefing, Sarah-Jane Denton looks at:
She argues that these developments do not in fact signify an abandonment of the EU (and the UK's) regulatory ambitions, particularly on ESG issues. Instead, she suggests that this is more in the nature of a welcome course correction, which should help infrastructure and energy sector businesses to focus their efforts on risk mitigation and resilience. This should be broadly beneficial to industry participants, given its criticality to delivering the solutions needed for a functioning low carbon economy, ranging from electrical vehicle charging infrastructure to grid-scale battery storage. The challenge will be for these players to not be distracted by erratic changes in policy direction, and for Governments to provide sufficient confidence to investors to enable the scale of developments needed.
While the Government has made it a key priority to fix the 'broken' planning system, some fixes are quicker than others. Changes to policy/guidance – such as the revised National Planning Policy Framework outlined below - allow almost immediate interventions in plan-making and decision-taking. However, other changes require legislation. This route normally takes significantly longer - although as explained below, the Planning and Infrastructure Bill has at least begun its Parliamentary journey.
In December 2024, the Labour Government published the updated National Planning Policy Framework ("NPPF") following an extensive industry consultation. The NPPF sets out the Government's national planning policies and governs both decision-making and plan-making. Crucially, the NPPF is a material consideration in the determination of planning applications, so any changes to the NPPF will have a direct influence on the decision making by local planning authorities ("LPAs"). General themes to note include:
In a move that will be of particular interest to investors in and operators of infrastructure, planning authorities are encouraged to "pay particular regard to facilitating development to meet the needs of a modern economy, including by identifying suitable locations for uses such as laboratories, gigafactories, data centres, digital infrastructure, freight and logistics... Planning policies and decisions should make provision for new, expanded or upgraded facilities and infrastructure to support the growth of knowledge and data-driven, creative or high technology industries, including data centres and grid connection."
For more information on all the above, see our detailed briefing – but perhaps the most important takeaway is that, since this is a policy measure, businesses seeking planning permission for new developments stand to benefit from the changes immediately.
In March 2025, the Government put the Planning and Infrastructure Bill (the "Bill") before Parliament. The Bill ties together a number of policies which had originally been outlined in the Government's manifesto prior to the General Election last summer, with a view to streamlining the planning system and unlocking development. Among other things, the legislation will:
For more information, see our April 2025 Planning Update.
The Bill has completed its House of Commons stages and is currently in the House of Lords. Although it may be possible for it to complete its Lords stages before the summer recess on 22 July 2025, this looks quite an ambitious timetable – making it more likely that we will have to wait until at least the Autumn for the Bill to receive Royal Assent. Further time is then likely to be needed for many aspects of the legislation to be fully implemented e.g. secondary legislation may be required to provide additional detail in some areas and guidance may need to be issued on certain aspects. It follows that businesses are likely to have to wait until 2026 before they see any concrete benefits from the reforms. That said, the legislation sends an important signal that the Government is serious about seeking to unlock development in the UK – which may be expected to encourage investment in new infrastructure.
For managers of closed-ended infrastructure funds, continuation vehicles offer the Infrastructure Sponsor an alternative to the traditional exit routes for investments - and as we explain below, their use is on the increase.
In a continuation vehicle structure the Infrastructure Sponsor will transfer an asset (the "CV Investment") from its existing fund to a newly established continuation vehicle ("CV"), also managed by the Infrastructure Sponsor. The CVs in the current market are typically either established for the "trophy assets" of the existing fund where the Infrastructure Sponsor sees further upside in holding the asset(s) for longer or where the current lifespan of the existing fund won't achieve the optimal financial outcome on exit of the relevant asset(s).
The number of CVs (and particularly single asset CVs) as well as infrastructure secondaries transactions have increased significantly over the last 3 to 4 years. This is because infrastructure funds are increasingly using CVs as an alternative to realise investments and as an added liquidity solution to infrastructure GPs. In 2022 and 2023, GP-led secondaries represented 68% and 56%, respectively, of infrastructure secondaries market volume (source: Campbell Lutyens H2 2023 Infrastructure Market Report). Looking forward, we expect infrastructure secondary volumes and use of CV structures to continue to rise rapidly given the increased maturation of the infrastructure asset class and limited marquee assets being available on the open M&A market.
That said, there are a number of key considerations that funds and any asset level lenders need to keep in mind when considering CVs. For more detail, see Continuation Vehicles and considerations for asset level debt, which includes discussion of:
With housing a key priority for the UK Government, we look at some of the main recent developments in this sector relevant to investors, developers and landlords/operators:
Commonhold was first implemented in England and Wales in 2002 but has only been used for 20 residential schemes. The essence of commonhold is that the common parts of the building are owned and managed by the flat-owners and there is no third-party landlord. From 2018 to 2020, the Law Commission explored how best to reinvigorate this form of tenure. Earlier this year the Government announced its intention to mandate its use for all newbuild flats by the end of this Parliament, and published a White Paper (see Exciting times: the Commonhold White Paper). This would be a seismic change for residential properties. We've collected some thoughts on what this might mean for the real estate sector on our commonhold page.
The New Towns Taskforce was set up in September 2024 to make recommendations to ministers on the location and delivery of new towns, in order to unlock economic growth and contribute to meeting housing demand in England. Its interim update was published in February 2025 and sets out its strategic aims. In the next phase, it will explore locations for new towns, looking for places where new development can be supported by existing infrastructure, alongside a longer-term housing pipeline.
The Government announced in March that the Building Safety Levy, first put on the agenda in 2021, will come into effect in Autumn 2026 pursuant to regulations to be laid later this year. The aim of the levy is to extract £3.4bn from residential developers over the next 10 years to fund the remediation of safety defects (such as cladding which contributed to the fire at Grenfell Tower in 2017).
The levy will apply to new residential developments comprising 10 or more units, or for PBSA developments of more than 30 bedspaces. Exemptions will include affordable housing, NHS hospitals and care homes. The levy will be calculated by reference to the number of square metres of qualifying residential floor space and rates will vary by local authority. The levy must be paid by the developer prior to applying for a building control completion certificate. For more detail, see our briefing on the levy.
The Government has recently conducted two consultations about amending the MEES regime which require properties to meet certain energy efficiency standards, measured by reference to their EPC ratings. The proposals were to increase the rating required of rented homes to C by 2030 and to alter the way in which EPCs are calculated. The results of these consultations are awaited – as is the publication of the Future Homes Standard (expected later this year), which will set out the standards that new build properties must meet.
The Older People's Housing Taskforce
The Older People’s Housing Taskforce published their long-awaited report in November 2024, exploring how best to support people to live well and longer in an age-friendly home and neighbourhood of their choice. It sets out a number of suggestions for ways to empower senior citizens and their families to access or adapt mainstream housing, to 'rightsize' at the right time, to develop new models of community-led housing and to stimulate new supply of homes and communities that support healthy ageing. For more detail, see our briefing: Building and investing in our future homes
For coverage of recent planning developments relevant to housing, see section 3 and for discussion of housing initiatives in the Infrastructure Strategy and the Spending Review, see section 1.
The UK heat network is growing fast, providing opportunities for both suppliers and property developers / owners looking for low carbon energy solutions. The investment potential has been estimated at £60-80 billion. Our guide explains:
A new regulatory regime for heat networks is expected to come into effect in January 2026. Among other things, it will require entities involved in the supply of heat and hot water via networks to comply with consumer protection obligations, provide certain information to the regulator (Ofgem) and draw up contingency plans for continuity of supply in the event of network failure. Landlords should note that in some cases, they could be regulated entities. For more information, see our detailed guide.
Heat networks are also covered as part of our recent Energy and Infrastructure video series, which looks at the following topics:
The UK's National Security and Investment Act (NSIA) enables the UK Government to scrutinise M&A deals and a range of other transactions (including acquisitions of assets only) on grounds of national security (click here for our detailed briefing). Many of the sectors where prior notification is mandatory for qualifying transactions relate to infrastructure, including communications and data, energy and transport – indeed, as we discuss below, the first challenge under the regime related to a provider of broadband fibre. Now that we are about 3 and half years into the new regime, we look at key recent developments in this space.
After being put on hold following the general election, the Labour Government has now (as part of its recently published Industrial Strategy) committed to launch a 12-week consultation on updating the scope of the 17 sensitive areas of the economy subject to mandatory notification under the NSIA (for details of the current sectors, see section 2 of our detailed briefing). There is some speculation that these new definitions may capture water infrastructure and also AI to a greater extent. The Government has said that the consultation will propose amendments that seek to ensure that the regime is targeted and proportionate, and increase certainty for investors, whilst still protecting national security. The Government has also committed to announce specific new exemptions to the mandatory regime shortly, for example in the case of liquidations.
There was a notable emphasis on national security in Labour's manifesto, with the party looking to burnish their national security credentials, which has traditionally been seen as a weak point for the party. This raised the prospect of the new Labour Government adopting at least a similar (or even tougher) approach to reviews under the NSIA regime than the previous Conservative administration. There is however some tension between strict national security goals and the new Government's overriding "pro-growth" agenda, in particular where that growth stems from international investment. In this briefing, our Competition team explores the key trends and watch areas, each of which leaves the Government with a delicate balance to strike between encouraging in-bound investment into the UK, whilst also ensuring that the UK's national security is not compromised.
Towards the end of 2024, the first ever judgment on an NSIA appeal was handed down. As noted above, it related to an infrastructure business, which provided fibre broadband connections to under-served rural areas. The High Court upheld the UK Government's decision to require Russian nationals to divest their shareholdings in the relevant business.
The key takeaway here is that the High Court exhibited a high degree of deference to the UK Government's views about the national security concerns and set a high bar for a high bar for parties subject to remedies orders seeking to overturn them. The judgment also makes some interesting comments on the consideration of current versus future national security risks (i.e. whether the Government can take action now to prevent risks from materialising) and on how significant financial losses for parties subject to divestment orders will be viewed. For more detail, see National Security & Investment Act: UK Government wins first challenge to divestment order.
Recent months have also seen the new US-UK trade deal which emphasises, amongst other things, enhanced coordination on foreign investment security. According to the documents published on both sides of the Atlantic, the US and UK intend to:
Whilst cooperation between the US and UK on national security matters is nothing new, speculation is mounting as to the finer detail and to what extent these high-level commitments may extend US influence over the UK Government's decision making under the NSIA. It seems unlikely that the US will gain some form of veto or direct intervention right, as some of the more colourful commentary has suggested. Indeed that assertion has been labelled as "complete nonsense" by a UK cabinet minister. However, there is perhaps a more realistic debate over whether the UK's NSIA decision making could potentially face heightened external pressure in the guise of bilateral coordination. Media reports have suggested that the US Government will be able to flag concerns over foreign investment in key infrastructure, although the US leveraging its relationships with allies to reinforce its own approach to national security has been a feature in recent years in any event – across both the Trump and Biden administrations. One example in recent years is the significant US pressure placed on its allies to restrict the use of Huawei equipment in 5G telecoms networks, leading to a UK ban.
The US has also been strongly encouraging its allies to replicate the "outbound CFIUS" regime to restrict certain investment into China. Both the EU and the UK are considering the need to implement or strengthen their outbound investment controls, though they are at different stages. So perhaps the use of a trade deal to bring about closer ties on national security issues isn't particularly surprising – rather, simply a continuation of a trend already underway. As always, the devil will be in the detail to come.
The UK's Infrastructure Strategy makes clear that the Government sees pension funds as an important source of private capital for infrastructure and energy sector markets. The following measures are intended to encourage investment by pensions funds in private markets, including (but not limited to) infrastructure/energy assets:
The Government's new Pension Schemes Bill includes provisions intended to boost the UK economy by increasing defined contribution (DC) pension default fund investment in private markets. The government has cited infrastructure and clean energy projects among the expected beneficiaries. Investment decisions will remain with the scheme or provider but the government expects there will be significantly increased private market investment and that this will also improve outcomes for savers.
The key relevant provisions are:
In the same context, seventeen of the largest workplace pension providers in the UK signed the new 'Mansion House Accord'. Under the Accord, which is not legally binding, signatories have committed to:
The government expects new investment of up to £50 billion (£25 billion in the UK) in assets including infrastructure, property and private equity. But this is subject to trustees' fiduciary duties to savers and the 'consumer duty' for FCA-authorised firms. There are also significant caveats in the Accord around the government and regulators doing their bit on various "critical enablers".
The Pension Schemes Bill also includes powers that could be used to require personal pension providers and master trust schemes to invest at least a prescribed percentage of default fund assets in private markets, and at least a certain amount of that in the UK. The government has said that it only intends to use its power if industry initiatives, including the Mansion House Accord, do not achieve the desired outcome. The power would expire at the end of 2035.
It's also worth noting that these are not the only Government initiatives designed to boost investment in infrastructure and other productive assets. For example, as reported in section 7 of our last issue, the Government is forcing greater pooling of assets by local government pension funds in England and Wales. It is envisaged that these larger funds will be better placed to make substantial investments in (among other things) infrastructure and energy assets, as has been the experience with similar large public sector pension funds in Canada and Australia.
The EU Omnibus (discussed above) proposed a number of changes to the Carbon Border Adjustment Mechanism Regulation ("CBAM"). As part of the Omnibus' drive for simplification, the proposed amendments to CBAM would take roughly 90% of companies currently participating out of scope of the regime, whilst still capturing over 99% of emissions.
The CBAM regime introduced a framework to impose financial charges on embedded carbon contained in goods and raw materials such as cement, aluminium and electricity. This levy aimed to deter the offshore manufacturing of carbon intensive goods by neutralising the financial incentive manufacturers experience to carry out their operations in jurisdictions with weaker environmental regulations, minimising so-called "carbon leakage". It also aims to level the playing field between importers and EU manufacturers of the same goods who must account for embedded emissions via charges under the EU Emissions Trading Systems ("ETS").
The Omnibus proposes to simplify CBAM, particularly for small importers. Such importers would be caught by CBAM, given its application to any shipment over a negligible value, currently set at EUR 150. Emissions associated with some shipments were usually negligible and the administrative compliance burden on importers would be disproportionate to their actual impact. The amendment therefore proposes to adjust the scope by shifting to a "mass threshold" – importers of less than 50 tonnes of CBAM covered goods in a year would be exempt. The threshold would be adjusted – potentially as often as annually – to ensure that 99% of imported emissions were always captured. Approximately 90% of importers would be exempt based on the revised scoping thresholds.
For the large entities who will continue to be in scope of the regime, the Omnibus proposed some further simplification measures. These include:
For more detailed analysis of CBAM developments, please see our briefing here.
A further development in the carbon market has arisen through the recent announcement from the UK and EU that they will be committing to linking their respective ETS schemes through a formal agreement. This marks a significant milestone in cooperation post Brexit and is expected to help stabilise carbon prices and reduce emissions. As part of this announcement, it was also revealed that the linked ETS should permit each party to benefit from an exemption from the other's CBAM, with the UK set to introduce a parallel system to the EU's in 2027 (a year after the EU CBAM charge begins to apply for imports into the EU from the UK). Currently, Switzerland is the only country to have successfully agreed an ETS linkage with the EU, and this process took over ten years to complete, so whilst time is clearly of the essence, there is still a lot to be agreed. For more information on why the ETS linkage is helpful along with other impacts of the UK-EU "re-set", please see section 7 of our briefing here.
