- Sandy Arbuthnott
- Sep 18
- 3 min read
Updated: Sep 23
Our September 2025 roundtable brought together a full house of investors, regulators, utilities, and policymakers to explore how the post-2022 macroeconomic environment is reshaping infrastructure investment. We set out to answer one central question:
How has the new macroeconomic environment changed infrastructure investment?
We answered this using Vallorii's VAPRI model, which applies forward-looking, AI-enabled risk analysis to company- and sector- level data.
What we discussed
The conversation unfolded across three themes:
The global supply vs demand of infrastructure capital : Participants stressed the divergence between global and UK conditions. International appetite for infrastructure remains strong, with private capital oversupplied in some areas as wealth management and new investors continue to enter the space. However, the UK was seen as more challenging: construction costs are high, regulatory uncertainty weighs heavily, and equity investors are increasingly selective. While political ambitions for growth are substantial, capital deployment lags, with the cost of raising even core infrastructure funds now at 12–15% (nominal).
The UK’s National Infrastructure and Service Transformation Assessment (NISTA) pipeline was highlighted as a first step to provide long-term demand signals. While still evolving, it aims to reduce friction and create certainty for investors across sectors beyond energy and transport.
Bond Market Risks and the potential for a bond market crash: We stress-tested how a bond-market crash would affect infrastructure returns. Using Heathrow as a case study, VAPRI modelling suggested that highly geared assets face outsized risks. Sustained yields above 8% could eliminate dividends, while an 18% probability exists of 10-year UK gilt yields exceeding 10% before 2030.
There was broad recognition that equity investors now start from required IRR levels and only then consider leverage, often pushing models to their limits. Comparative perspectives suggested the US is currently more attractive than the UK, with certain projects (such as Sizewell) seen as bright spots, while others (notably in water) raise concerns.
How to mitigate risks like a bond market crash for infra, particularly for heavily geared assets: The group then explored how regulatory financing models affect resilience. Under the UK RAB framework, equity returns rise with leverage—but so too does exposure to bond market volatility. Lower gearing can reduce risk but also significantly dilute returns, underlining the importance of trade-offs and timing in financing strategies.
Discussion centered on how regulation shapes resilience. In electricity, where long-term investment requirements are clear, regulatory adaptation is possible. But in sectors like gas, where policy direction is uncertain, regulators struggle to provide stable frameworks. This creates challenges for long-term planning and incentivises only incremental steps. Political cycles were seen as amplifying uncertainty. Questions remain about whether regulatory frameworks can sufficiently insulate investment from shifts in policy sentiment, especially around commitments such as CP30.
How we answered the question
Across perspectives, the roundtable agreed that the macroeconomic break of 2022 has fundamentally reset the price of capital. Infrastructure is shifting from a yield-to-growth regime: investors now demand resilience to macro shocks and stronger upside potential.
The answer was clear: while infrastructure remains attractive, capital supply is not yet sufficient to meet demand in the UK, and the gap will only close if frameworks improve coordination, reduce uncertainty, and provide confidence in long-term returns.
What stood out
Several themes made the discussion especially rich:
Global vs. UK divergence: International capital continues to flow, but the UK is viewed as relatively higher-risk.
Cross-sectoral challenges: From utilities to transport, better long-term planning and coordination are needed to align investment with macroeconomic realities.
AI-enabled analysis: VAPRI’s scenario modelling added quantitative depth—simulating bond market shocks and portfolio impacts helped ground the debate in data rather than speculation.
Looking ahead
We closed with consensus that infrastructure investment will increasingly hinge on managing macroeconomic risk—not just funding ambition. With demand rising faster than capital flows, political and regulatory frameworks must evolve to bridge the gap.