Our July 2026 roundtable focussed on geopolitical risk in regulated infrastructure:

What impact does foreign equipment and capital have on UK infrastructure finance and regulation?

Drawing on Vallorii’s Cost of Capital Lab, we explored how geopolitics enters infrastructure assets: imported equipment behind capital and maintenance programmes, and the foreign capital financing the sector. The discussion suggested that affordability, security, and the cost of capital, are closely interlinked through foreign control.

Import dependence turns geopolitical shocks into consumer bills. The UK's goods and equipment trade deficit has widened to −7.2% of GDP. A shift away from manufacturing means that infrastructure depends on foreign imports. Around £45b is directly imported for infrastructure and construction each year. This means that supply chain interruptions directly feature in the cost base and consumer bills through pass-through mechanisms. Local suppliers provide little protection due to their own reliance on foreign imports. For some materials, local stockpiling protects against short-term price spikes if long-term demand is guaranteed.

The cost of capital is increasingly set abroad, not in Westminster. 85% of UK gilt-price movement is driven by global bond markets, while domestic events, such as Brexit, the Truss mini-budget, the 2024 election, explain only about 15%. UK utility stocks move parallel to gilt prices Under Arbitrage Pricing Theory, this non-diversifiable risk adds 60–70bps to investor hurdle rates not captured by CAPM.

UK infrastructure has quietly become a foreign-owned asset class. UK-based funds have drained more than $160bn from UK equities since 2016, halving their average UK-equity weight to 18%. Today UK investors own under 7% of the equity in major UK regulated infrastructure. Low domestic savings and the absence of local large-cap infrastructure funds means that the government’s investment program will have to rely heavily on foreign capital for the foreseeable future.

Foreign capital is cheaper in theory—but hardly justified in practice. Economic theory (CAPM) tells us that lobal diversification lowers the real hurdle rate on UK water from 5.70% to 3.76%, a ~194bps discount. All but one participant agreed with this position. Everyone else said that foreign cost of capital is either similar or higher than local capital. This makes intuitive sense. Why would anyone invest domestically otherwise? This key limitation of economic theory will be further discussed in upcoming roundtables.

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