An annual increase in infrastructure spending growth of only 5 basis points would create an additional 1.1 million jobs across Europe over six years, according to a new report released by TheCityUK’s International Regulatory Strategy Group (IRSG), co-sponsored with City of London Corporation.
The research, using an econometric model developed by Accenture (NYSE: ACN), shows that in the first year of the investment spend, 125,000 new jobs would be created, with a further 975,000 over the subsequent five years.
The report Long-Term Finance for Infrastructure and Growth Companies in Europe quantifies the effects on economic growth and job creation by improving Europe’s capital markets and focuses on access to finance for long-term infrastructure and growth companies. It identifies obstacles to investment and makes recommendations on how to remove these barriers, calling for EU policymakers, regulators and the financial services industry to work together.
Chris Cummings, Chief Executive, TheCityUK, said,
As our research shows, bolstering investment would create over 1 million jobs across Europe. The economic model developed by Accenture demonstrates even a small increase in infrastructure spending growth will have a galvanising effect on job creation and economic growth in the EU.
The current gap between infrastructure spending across the EU and investment needs are significant, ranging from conservative estimates of €1.5-2 trillion to €4 trillion in the five years to 2020. Worldwide, TheCityUK estimates that infrastructure investment needs over the next 15 years will reach nearly £45 trillion, or €60 trillion. These needs are beyond the public purse, which means that private sector know-how and resources are needed. It is only when the private and public sector work in partnership that long-term finance for infrastructure and growth companies can be unlocked and the benefits delivered for citizens across the EU.
The report by TheCityUK’s and City of London Corporation’s IRSG makes a series of specific recommendations to all relevant stakeholders across the EU, as well as the financial services industry:
- European Commission: deliver a transparent Infrastructure Plan with new instruments for long-term investment, promote international investment in EU projects and remove the bias towards debt over equity.
- Member States’ Governments: make infrastructure planning transparent, reduce uncertainty and political risk, support growth companies to become ‘investor ready’.
- Central Banks: develop central credit registers and credit scoring standards and remove obstacles to securitisation to improve growth companies’ access to finance.
- Financial Regulators and Supervisory Authorities: ensure capital ratio requirements enable long-term finance, support the MiFID SME Growth Market classification.
- Financial Services Industry: create innovative products and instruments to increase non-bank finance for infrastructure and growth companies, work with the European Commission and Member State Governments to develop the project pipeline.
Mr Cummings concluded,
These recommendations are aimed at allowing institutions the ability to allocate, assess and better manage risk associated with infrastructure and growth companies investment. It is essential that the industry works closely with other EU stakeholders to ensure this becomes a reality.”