With inflation rising and the threat of a cost-of-living crisis looming, the pandemic’s economic impact is becoming more apparent. As a result, it has never been more important for our industry to create meaningful partnerships with the public sector to support cities’ and councils’ growth. 

Bill Hughes

Bill Hughes

Weighed down by commitments to maintain services, the public purse faces huge challenges. By contrast, the private markets are on a growth trajectory, emitting ambition and confidence. Now is the time for long-term investment to back local authorities that want to deliver more but are constrained by their balance sheets.

Key to the growth and social outcomes we seek will be the relationships between those who steward places and those who steward society’s pensions and savings. The potential is evident.

The UK government has announced plans to invest £200bn in infrastructure to drive both future growth and ‘Build Back Better’ ambitions. Yet given the strain on public finances, we have an opportunity to come alongside government investment with enabling capital, resulting in a strong pipeline of opportunities for increasingly investment-focused corporate borrowers in areas such as clean energy, transport, digital infrastructure and real-estate-led city regeneration.

With this in mind, we want to see relationships between the public sector and investors strengthen, flourish and, crucially, last for the long term. Such collaborations don’t have to revolve specifically around things such as funding; rather they should lead to better dialogue and engagement. This will help each side better understand the challenges faced by the other, and lead to better solutions.

One such example is our recently announced £4bn collaboration with the West Midlands Combined Authority, which will amplify and hasten the scope for patient investment to make a difference in the region.

The devolution of powers to the regions (cities and councils) has helped us enormously. One doesn’t go to Westminster or Whitehall to assemble an asset portfolio that includes Bristol, Cardiff, Edinburgh, Glasgow, Leeds and Newcastle. Local vision gets delivered by local and devolved government. Working with local politicians, it is possible to achieve ‘place-making’ and ‘place-mending’ in ways that are tuned in to the needs of the local community.

Investment that contemplates its interaction with society is more likely to have long-term relevance. It is also less exposed to the risk of obsolescence. If we focus on investing in what communities need now and in the long term, then those investments will benefit from demand. This approach will evolve, but as we pull this together, my governing thought is ‘inclusive capitalism’.

By this I mean that alongside investing wisely, we use the power of partnerships to deliver positive economic and social outcomes for the largest possible number of people.

Collaboration with the investment community enables local authorities to access appropriate funding, which helps to deliver their ambitions. Such an approach also means those whose pensions and savings we steward stand to benefit – financially and socially. Such collaboration will go a long way in creating the foundations of the recovery we all want to see.

Bill Hughes is global head of LGIM Real Assets