The landscape of Scotland’s infrastructure has undoubtedly witnessed some impressive developments in recent years. These have, notably, included the £1.3 billion Queensferry Crossing, due to open this summer, and the £824 million New South Glasgow Hospitals project – as well as the ongoing delivery of the Non-Profit Distributing (NPD) programme, including the M74/M8 upgrade and the Aberdeen bypass project.

Michael Stoneham, one of the leading banking lawyers in Scotland and Head of Energy and Infrastructure Finance at Brodies, agrees these projects will represent a significant achievement. What is going to happen in the coming five years, however, is not so clear.

"A critical point is that it’s not going to be possible to deliver what we need in infrastructure spending in the next few years from available capital budgets and revenue spending – it’s a matter of political judgment in terms of how ambitious we are about leveraging the public commitment with additional private finance," he explains.

While Scotland can undertake two or three of these flagship projects per year, the use of the NPD model has somewhat ground to a halt. There were some EU accounting issues raised because the public sector – for good reasons – was trying to exercise closer control. This has led to these projects being viewed on the public-sector balance sheet, so a new delivery model has to be found.

Stoneham continues: "Rather than a standardised programme being promoted by government there are individual sponsors bringing forward their own projects – such as local authorities through their City Deal programmes – and that has been the consequence of an apparent lessening of central direction. This won’t necessarily lead to the big increase in infrastructure project delivery that is needed."

According to a survey conducted by Brodies in March this year, it’s a view shared by developers and investors. Last year, the Scottish Government announced that it was to expand its existing infrastructure investment plan and introduce new arrangements to engage with businesses to shape policy and provide up-to-date information and advice, with an extra £100m to be made available to speed up delivery of infrastructure projects.

There is apparently a clear appetite in the private sector for earlier and more detailed information from government regarding the pipeline of new public projects.

"I’m a little concerned that it’s become something of a political football, and we need to demonstrate a future programme of work for the private sector supply chain, whether it’s contractors or investors. Otherwise they will simply go elsewhere – Ireland, somewhere else in Europe or even further afield," Stoneham continues.

Last year, Aberdeen City Council proved what can be accomplished in terms of private/public collaboration in a £370m bond issue advised by Brodies. It was the first time a Scottish local authority had issued bonds, the first to have them listed on the London Stock Exchange and the first time a credit rating was awarded to both a Scottish local authority and its bond securities.

With the future of funding by the European Investment Bank in some doubt until completion of the Brexit negotiations it could also be a
template for other Scottish councils to fund their capital projects.

"There’s much still to be discussed between the public and private sectors," he says. "No one wants to invest if they are not certain of a workstream – though after we get through the current period of uncertainty we are confident that these needs will be addressed. So at Brodies we are hiring key people and developing a strong infrastructure team.

Drysdale Graham, who joined the company this month, has more than 30 years’ experience in this area, having worked closely with leading sponsors, investors and funders on high-profile PFI, PPP and NPD-funded projects.

The track record of Scottish infrastructure has been good, it can be regenerated – and the approach taken by Aberdeen City Council demonstrates what can be done."