Bloomberg News

U.K. Said to Sign Deal to Tap Pension Funds for Infrastructure

November 26, 2011

Nov. 26 (Bloomberg) -- The U.K. Treasury reached an agreement with pension funds and infrastructure investors to finance projects as Chancellor of the Exchequer George Osborne tries to revive the economy.

Hermes GPE LLP, Meridiam Infrastructure, the Greater Manchester Pension Fund, the London Pensions Fund Authority, and other funds, which manage a combined 50 billion pounds ($77 billion), signed a memorandum of understanding, said a person with knowledge of the agreement, who declined to be identified because the plans aren’t yet public. The group will work over coming weeks to attract more corporate pension funds to invest.

The agreement is part of a 10 billion-pound boost for infrastructure that Osborne will announce this week, said a separate person with knowledge of the matter. The Treasury declined to comment.

Osborne is preparing to announce plans to boost economic growth as he drives through the deepest budget cuts since World War II. By tapping pension funds, Osborne will be able to start channeling money to projects immediately as he seeks ways of boosting economic growth. In return, the funds would receive stable, long-term income from the projects.

Under the agreement, pension funds will allocate money to fund the construction of projects and remain involved in them once they are operating, said the person. The funds will be used to provide cash to existing projects and fund new ones.

The government will next week publish a list of top infrastructure projects it wants to build, including rail, roads energy and high-speed broadband, the Financial Times reported Nov. 24. Expanding the London orbital M25 motorway, the Great Western railway line and Crossrail, a subterranean line that bisects London, will be on the list, the newspaper reported.

Lawmakers said in September that investors are making too much money out of the privately financed delivery of public services. The U.K. operates about 700 privately financed public projects such as hospitals, schools, prisons, courts and roads and is considering a further 61 proposals.

--Editors: Edward Evans, Colin Keatinge.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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