What is concession infrastructure, and why does it represent an attractive and growing opportunity for local government pension schemes? Aberdeen Investment’s Rosie Eden, director, concession infrastructure and Karen Hill, managing director, concession infrastructure, explain.
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Back in the 1990s, the UK government introduced the idea of public-private partnerships (PPP) for critical infrastructure projects. Now a well-established model the world over, PPP represents a compelling category for institutional infrastructure investors.
Under the PPP model, governments tender projects to the private sector to design, build, finance, operate and maintain infrastructure such as social/affordable housing and hospitals, as well as transport infrastructure including roads and rail. These long-term contracts are known as ‘concessions’. But what makes these contracts so interesting for local government pension schemes?
Six key characteristics
In our view, six concession infrastructure characteristics are important for local government pension schemes:
*predictable, predominantly availability-based contractual cashflows.
*potential for significant total returns versus equities or bonds.
*low volatility.
*inflation correlation.
*supportive of UK productive finance and place-based objectives.
*source of diversification.
UK infrastructure gap
Our research shows the UK needs £584bn1 of infrastructure investment by 2050 just to keep pace with current rates of productivity, urbanisation and demographic change, including £39bn1 for rail alone. Delivering this scale of investment needs private capital, and long-term concessions are a model shown to effectively achieve this. The potential opportunities for investors are considerable.
Positive PPP prospects
Recent UK government communications certainly suggest a growing appetite for private investment into infrastructure projects.
In its June 2025 10 Year Infrastructure Strategy, HM Treasury expressed a commitment to ensuring a healthy and visible supply of projects to create demand for private capital, by continuing to evolve finance models and explore the use of PPPs.
The strategy cites the development of Euston station as an example of how the model would be used. The government also signalled its intention to explore the feasibility of using new PPP models for decarbonising the public sector estate, and in certain types of primary care and community health infrastructure.
What’s more, the subsequent UK Budget acknowledged the importance of private finance in infrastructure delivery. It included an announcement on NHS Neighbourhood Health Centres, indicating a private finance model was clearly back on the agenda at a time when the UK needs growth.
How to invest in concession infrastructure
Leading concession infrastructure managers have the experience to source direct investments in PPPs and long-term concession-style infrastructure assets for local government pension schemes, with the objective of producing long-term sustainable returns.
We believe an integrated approach – where origination and asset management are closely connected – ensures continuity of insight throughout the asset lifecycle, enabling high-performance outcomes across investment, development, and operations.
Concession infrastructure in action
Over the past 25 years, we’ve invested in 140 concession infrastructure projects globally on behalf of clients, in important public services from transportation to energy transition. In a period of reduced public investment, our projects illustrate how concessions can deliver infrastructure for the public efficiently and sustainably. Here are some of our latest UK projects:
Silvertown Tunnel is an example of an Aberdeen PPP concession infrastructure investment that’s contributing to the local economy. This asset is the result of an availability-based PPP contract to design, build, operate and maintain a 1.4 km twin bore road tunnel under the River Thames in east London.
The 25-year operational period commenced in April 2025 following a five-year construction period. The tunnel was built to support economic and population growth across both east and south-east London and reduce congestion around the Blackwall tunnels (the only other tunnels crossing the Thames in East London).
Silvertown Tunnel is already carrying around 22,000 vehicles on a typical weekday and has reduced journey times during the morning peak by around 70% as well as boosting public transport use as a result of its dedicated bus lanes.
Deeside, an anaerobic digestion plant in North Wales with carbon capture technology and a combined heat and power facility, is another potentially impactful portfolio asset. The plant is designed to convert food and other organic waste into renewable energy which will be sold to the grid and nearby industrial partners. It will also produce green fertiliser which will displace chemical fertilisers.
We conducted a whole life carbon analysis which demonstrated that the plant should achieve an exceptionally low lifecycle carbon intensity of 0.98 gCO2e/kWh. That’s well below the 100gCO2e/kWh threshold set by the EU for sustainable power generation and very much in line with the UK green energy framework. As such, the plant will contribute to the reduction of the UK’s emissions and the transition to a circular economy. Whilst not pure concession infrastructure, the economics are made possible by utilising the UK government’s Green Gas Support Scheme which incentivises the development of plants like these in order to displace natural gas.
Velindre Cancer Centre, in Cardiff, Wales. This facility represents a major investment in the future of sustainable healthcare for the region. The new centre is being built to meet the highest sustainability standards and will provide high-quality cancer care services to over 1.5 million people in Wales; a truly vital project.
Construction began in March 2024, with completion targeted for March 2027. It is designed to use all-electric solutions and air source heat pump infrastructure, supporting low energy demand and low operational carbon. A strategy is in place to reduce site waste through off-site manufacture of components, to minimise transportation requirements and create efficiencies in the construction and maintenance of the hospital.
Final thoughts
Local government pension schemes need reliable income streams to support their increasing cashflow needs, whilst at the same time many have UK productive finance and place-based objectives as well. An experienced concession infrastructure partner such as Aberdeen Investments can help schemes achieve their goals.
1 Source: Aberdeen, May 2025
Next steps
To find out more about investing in infrastructure with Aberdeen Investments, contact one of our team or visit our website.
The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results.
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Any research or analysis used in the preparation of this material has been procured by Aberdeen for its own use and may have been acted on for its own purpose. The results thus obtained are made available only coincidentally and are not guaranteed as to their accuracy. This material may contain projections or other forward-looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially.
