Newspaper article The Journal (Newcastle, England)

Infrastructure Predicted to Boom in Years Ahead

Newspaper article The Journal (Newcastle, England)

Infrastructure Predicted to Boom in Years Ahead

Article excerpt


SOMETIMES it pays to ignore short-term volatility and focus on the long term. When markets seem to be sound-tracked by The Flight of the Bumblebee, it is worth taking a step back, setting aside sub-prime, credit crunches and structured investment vehicles - and considering how the major challenges facing us will translate into deeper, more profound investment trends.

One long-term trend that we have covered before is the rise in food prices and commodity costs. Another, and our theme for this week, is infrastructure. Over the coming years, we see increasing business for the companies who make and maintain the energy, water, and transport air networks that support the global economy.

Firstly, global demand for energy is set to increase over the next decades, as the Chinese and Indian economies boom, and that will mean more spending on infrastructure. The International Energy Agency forecasts that USEUR20 trillion will be spent on energy infrastructure between 2005 and 2030.

Infrastructure companies' business will also be supported by the need to replace ageing equipment, not just for commercial reasons, but also to meet political demands, like measures to prevent climate change and ensure energy security. The UK Government's White Paper on Energy last year said that substantial new investment will be needed in infrastructure in the UK.

Changing demographics and investment trends are also supporting demand for infrastructure companies.

These businesses by their nature tend to have long-lasting, reliable returns.

That makes them very attractive to investors like pension funds, who need a guaranteed, long-term stream of cash.

The most accessible way for UK investors to profit from the infrastructure theme is via the national utility companies. Electricity and gas network manager National Grid remains our preferred UK utility, and we think it is the best-placed candidate in this country to benefit from our broader global infrastructure theme. …

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