How can the UK’s National Wealth Fund unlock private infrastructure investment?

Around the world, global asset managers, sovereign wealth funds and large public pension funds play a pivotal role in infrastructure investment. They leverage their expertise to manage immense resources – with some overseeing hundreds of billions of dollars in assets under management (AUM).

Now, with the UK’s ambitious move to reshape the UK Infrastructure Bank (UKIB) into the new National Wealth Fund (NWF), we find ourselves at an important crossroads. The NWF comes with a capital base of £27.8 billion – modest compared to the scale of many global funds. But its success hinges not on the size of its capital, rather on its ability to act strategically to attract private investment into UK infrastructure, a commitment which is written into its mandate. The task ahead is clear: how can the NWF carve out a role that complements rather than competes with private sector involvement?

The good news is that the NWF is not starting from square one. UKIB’s legacy provides a solid foundation, having already demonstrated its capability in mobilising capital for early-stage, higher-risk projects that tend to be avoided by more cautious institutional investors. These efforts have already started to fill gaps in infrastructure financing, while beginning to unlock new potential in areas that were once considered too risky.

As the NWF evolves, it will need to build upon UKIB’s successes, ensuring its investments maintain their impact in the context of a new broader mandate. It must continue to remain laser focused on identifying areas of underinvestment where it can play a crucial role and find the balance between being an enabler of private capital and a leader in new investment opportunities.

With UKIB having made many impactful supply chain investments in the likes of Cornish Lithium and Pragmatic Semiconductors, a particularly promising area for the NWF lies in expanding its focus in this space. By continuing to ramp up support for critical infrastructure such as raw materials – as it has with its recent Cornish Metals investment – as well as manufacturing and enabling technologies, the NWF can strengthen the broader infrastructure ecosystem in the UK. However, these investments come with their own set of risks and will require strategic foresight and careful management to ensure they are both impactful and sustainable in the long run.

The NWF will have real impact, as long as it continues to operate with a strong focus on three core areas. Firstly, the NWF is well placed to target market gaps by investing in sectors and projects where private capital remains scarce due to perceived commercial or technological risk or long timelines for return. By stepping in early it can help mitigate some of these risks, catalysing private investment in the long run and helping to unlock broader economic growth.

Secondly, collaborating with private investors and building partnerships with industry is essential to success. The NWF is used to working hand-in-hand with private capital to amplify its impact, as this is part of its mandate, and strong ongoing engagement with the private sector is key to building on the momentum of the UKIB.

Finally, by continuing to foster innovation and by championing cutting-edge sectors like green energy, sustainable transport and emerging technologies, the NWF has an opportunity to not only help meet the UK’s decarbonisation goals, but also position the country as a leader in these potentially transformative industries.

The NWF’s potential role in shaping the UK’s infrastructure future cannot be overstated. With the right strategy, a focus on the areas where the private sector hesitates to tread, and a commitment to collaboration, it can continue to drive the investment needed to build a more sustainable, resilient economy. The success of the NWF has the potential to set the stage for a prosperous, low-carbon future for the UK.