LONDON: A report from global law firm Linklaters says global institutional investors have funds of US$1trillion at their disposal to spend on European infrastructure assets over the next 10 years.
Research from Oxford Analytica on the subsequent impact on the EU economy suggests Member Countries could see a further 1.4 percent rise in their annual GDP between 2014 and 2023. The cumulative GDP impact in the next decade would translate into more than US$3 trillion with a multiplier effect spanning supplier industries, such as construction and raw materials, consumer spending and increased tax revenues.
The study identified investors from Canada, China/Hong Kong, the GCC region, Japan and South Korea who have increased their investments in European infrastructure assets by 465 percent in the last three years compared with the previous four.
Linklaters expects an increase in corporate disposals to provide more opportunities as higher valuations encourage companies to sell subsidiaries or stakes in them, often in a bid to reduce debt.
The company warns, however, of an impending price bubble: "There is now too much money chasing too few deals," says Georg Inderst, a consultant who wrote a study on private infrastructure spending for the European Investment Bank in 2013.
Linklaters notes: "Some investors now worry that infrastructure prices are a bubble waiting to burst. This was the terminology used by one senior executive that we interviewed, pointing to the inflated prices paid for airports across Europe. He argues that prices have soared too high, making it a question of when, not if, they will crash."