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£25bn UK Investment By Insurance Firms

insurers investingSix of the UK’s major insurance firms are set to invest a total of £25bn in government projects over the coming year. The six firms are Scottish Widows, Standard Life, Friends Life, Prudential, Aviva and Legal & General. These insurance firms are going to put their investments into a revamped National Infrastructure Plan coming from the treasury, which provides funding for infrastructure schemes such as roads, railways and fibre optic broadband rollouts. The new investments will provide £375bn for the schemes, which is an increase on 2012’s figure of £309bn.

There is a vague idea of how the money will be spent, but the specifics remain unclear. More in-depth plans are expected to be revealed in today’s Autumn Statement from the Chancellor of the Exchequer, George Osborne. The treasury’s chief secretary Danny Alexander said: “The industry investment is a major vote of confidence from the private sector.” Mr Alexander has admitted that the UK has been under-investing into infrastructure for several decades. However, he also added: “The most important thing we’ve done as a government is create an environment in which people want to come in and invest in British infrastructure.”

These infrastructure improvement projects are going on all over the UK. A couple of specific projects have been confirmed, such as a £50m investment towards the redevelopment of Gatwick Airport’s train station, £1bn for an extension of the Northern Line out towards Battersea and various improvements to the A14 near Felixstowe. Prior to these new investments, insurance firms were waiting for a decision on new EU legislation. If the legislation (named Solvency II) passed, insurance firms would be required to have a lot more capital available to ensure that they could meet their customer’s life insurance needs. However, this clause was terminated in 2013, allowing the insurers to invest their money elsewhere.

The government is also planning to contribute even more to the National Infrastructure Plan by selling their 40% stake in Eurostar, with their goal being a £20bn contribution, up from the initial target of £10bn. The government plans to start selling these assets in 2014, and being rid of all assets by the year 2020.

James Savery, 05 December 2013

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