Introduction
Following the release of the Labour Party’s 2024 manifesto, it is clear that there has been a directional shift in comparison to the party’s 2019 manifesto, towards seeking to appeal to private business and investors. In general, Labour has pivoted away from nationalisation, although if the party comes to power it is still expected to bring passenger rail franchises back to the public sector when contracts expire. We have delved into the Labour Party’s manifesto to identify what a possible Labour victory could mean for UK infrastructure.
Great British Energy
Labour has proposed a publicly owned clean power company, to be named Great British Energy (GB Energy). When first announced at the September 2022 Labour conference, it appeared that Labour proposed GB Energy as a public electricity utility. However, the manifesto has clarified that GB Energy would instead be a publicly owned investment platform headquartered in Scotland and working in partnership with industry and trade unions to support a range of clean energy technologies. GB Energy is also expected to invest in established technologies where public investment can boost private sector engagement, such as in the development and scaling of municipal and community energy. To support the plans, Labour would capitalise GB Energy with £8.3 billion over the next parliament. Whether this approach will seek to emulate either the now-privatised Green Investment Bank or the UK Infrastructure Bank set up in 2021, or to take a different path entirely, remains to be seen. The manifesto clearly has plans for this organisation to ‘crowd in’ private investment across a wide range of asset technologies and sizes, and many of the other Labour pledges (e.g. on planning reform) will need to be delivered to ensure that there are sufficient opportunities for that investment. However, unblocking and accelerating the pipeline of greenfield energy assets will provide a clear signal to developers, investors and the wider supply chain that Labour is serious about supporting the entrenchment of green power in the UK.
More generally on electricity policy, Labour also supports decentralised community power projects and, more significantly, has recognised that the single biggest obstacle to new, clean energy development is the national grid, which it has pledged to upgrade, alongside improvements to port capacity. It remains to be seen whether Labour’s apparent shift in policy from direct government development to an industry partnership model is good news for developers of new energy projects and their investors. Given that the £8.3bn pledged for GB Energy is a small fraction of the total investment needed, there is a clear advantage to the entire industry in spreading support across more projects and more technologies, by crowding in private investment rather than maintaining 100% government stakes. The downside risk is that small government stakes may constrain more projects with regulatory burdens like subsidy control, introducing further delays into project consenting. As ever, it will very much depend on the detailed implementation.
Rail franchises
Labour’s stated objective for UK rail networks is to deliver a unified system that focuses on reliable, affordable, high-quality and efficient services, along with ensuring safety and accessibility. In order to achieve this, Labour plans to establish a new public body, Great British Railways. Great British Railways would be responsible for investment, day-to-day operational delivery and innovations and improvements for passengers. Current contracts held by private train operators would be folded into Great British Railways as they expire or if they are terminated where operators’ service delivery levels fall below required levels. For example, in the days before the manifesto was published Labour indicated that it would consider terminating the operating contract of Avanti West Coast, citing poor service levels down the West Coast Main Line as the reason. Despite the proposed changes to the rail industry however it will likely be business as usual for most rolling stock leasing companies and freight providers (ROSCOs), at least in the short to medium term. The potential impact of such changes on ROSCOs in the long term remains to be seen and will likely take time to become apparent. However, if all operators are brought back under public ownership, it is expected that leasing prices for rolling stock might decrease, which could impact ROSCOs. On the other hand, not taking risk on a rail operator might come as a welcome change for investors with ROSCO assets.
Investment in UK ports
Alongside GB Energy, Labour proposes to establish the National Wealth Fund, aimed at investing in industries and creating jobs. A key focus for the National Wealth Fund is British ports, which would be set to receive up to £1.8bn of funding under a Labour government. The investment by the National Wealth Fund will have a target of attracting £3 of private investment for every £1 of public investment, making it clear Labour intends private capital to join in with the funding of ports throughout Britain. Given the significant private investment in ports which currently exists, it remains to be seen where the potential funding will be channelled, but it is possible that smaller ports may be the major beneficiaries of a Labour government’s focus. In the long term, this could ultimately result in smaller ports becoming an attractive asset following a period of investment.
Windfall tax
Labour proposes to increase the Energy Profits Levy on North Sea oil and gas, colloquially known as the ‘windfall tax’, as part of its plan to fund green investments. Increases to this existing tax are forecast to raise an additional £1.2 billion per year over the next parliament. The rate will be increased by 3% meaning a total effective rate of 78% for oil companies. Additionally, the levy will be extended from the current sunset in 2028 to the end of the next parliament, but retaining the Energy Security Investment Mechanism (a promise to remove the tax if oil prices fall significantly). Perhaps most strikingly, Labour intends to remove the investment allowance which (when aggregated with other reliefs) currently permits oil companies to recover tax relief of up to 91p for every £1 of new capex. Removal of the investment allowance will likely remove around 10p of tax relief for every £1 invested, although this would be partly offset by an extra 3p purely from the increase in the tax rate. Groups planning major investments will need to reevaluate the economics.
Nuclear policy
The Labour manifesto also signals continued support for the UK’s nuclear industry, and presents nuclear as an available tool in the transition away from oil and gas. The party states it is committed to completing the major nuclear projects at Hinkley and Sizewell, as well as extending the life of existing plants and backing new nuclear initiatives, including small modular reactors. For the nuclear industry and its investors, the key attribute of Labour’s proposals is stability: policy objectives would remain largely unchanged, though the exact form of Labour’s support for those objectives remains unclear. Beyond nuclear policy itself, there are some broader, non-nuclear-specific pledges that should further support the industry, including initiatives to support global clean energy supply chains, to reform and accelerate grid connections, and to speed up approvals timelines in the regulation of new technology.
