National Wealth Fund to Change Funding Strategy After UK Broadband Challenges

The National Wealth Fund (NWF), which was originally established by the previous government in 2021 as the UK Infrastructure Bank (here) – using public investment to help unlock more private funding for infrastructure projects, looks set to change its funding strategy in 2026 after experiencing “challenges” in certain sectors, such as broadband infrastructure (altnets).

According to the FT (paywall), the NWF will in January 2026 announce a new strategy that shifts away from using taxpayer funding to back third-party investment funds in favour of bolstering private sector investment in UK infrastructure projects. The NWF’s new CEO, Oliver Holbourn, confirmed that the “priority moving forwards would be direct investments or co-investments versus using externally managed funds”.

Part of this stems from the fact that third-party funds tend to charge investors high fees, which can make them less attractive. Some MPs have previously criticised the NWF for investing in third-party funds in this way, and also for helping to fund projects that were already drawing from private capital.

The move also comes against a background of growing challenges in some of the sectors where the NWF has been most active, such as digital infrastructure, where they’ve actively invested in alternative full fibre broadband networks like CityFibre, Wessex Internet, Netomnia, Hyperoptic, Fibrus, Wildanet, Quickline, Gigaclear and nexfibre. This sometimes occurred alongside public subsidies from the £5bn Project Gigabit broadband roll-out.

However, many altnets have run into trouble (here) due to rising build costs, strong competition from rivals (i.e. overbuild and the challenges of growing take-up) and the difficulties of securing fresh investment during a period of high interest rates (not to mention rising debt repayments). As a result, some altnets may struggle to turn a profit in the future and a number of investors (e.g. key UK banks like NatWest and Lloyds) are now expecting to take losses.

Generally, the NWF aspires for each of its investments to deliver a return, yet overall the fund – across all sectors – made a reported loss of £152.2m (before tax) over the past year (up from £85.6m in the previous year). A spokesperson for the NWF said a “loss was expected at this stage of growth in our portfolio”, but it also admitted the figures were “higher than budgeted due to specific challenges affecting certain assets and market conditions in the digital infrastructure sector”.

Consolidation is happening in the altnet space, which is necessary to help grow some real scale, albeit at a slower pace than might be ideal. This is at least partly down to some network operators and investors harbouring an inflated idea of their own asset values. The risk is that the longer those players take to reach agreement, the greater the risk that any future deal may result in an even bigger hit.