The CBI has called on the government to lift the credit ratings of offshore wind, smart grid and new nuclear projects if it wants to attract private-sector investors such as pension and sovereign wealth funds to finance the overhaul of the UK’s creaking energy infrastructure.

Over £250bn is needed to complete the 500 energy, transport, waste, water, and digital projects in the government’s pipeline, 70 per cent of which will need to come from the private sector, the business group estimates in a report out today. The bulk of these projects have a low carbon element as part of the government’s efforts to decarbonise the electricity sector and enhance the rail network.

The CBI argued the funding is needed not just to keep the country’s infrastructure operating, but also to help attract foreign investment. A CBI survey last year found 80 per cent of business leaders said the quality of energy and transport infrastructure had a significant impact on future investment decisions, while 39 per cent said the energy system had deteriorated in the past five years and half said the transport network had done the same.

Meanwhile, the World Economic Forum ranks the UK’s infrastructure as 28th in the world, behind international competitors such as China and Germany, as well as eastern European nations such as the Czech Republic and Croatia.

The CBI says tapping into the £1.5tr of capital held in UK pension funds could make a “huge contribution” to overhauling the country’s infrastructure, creating jobs and growth at the same time.

Only a fraction of this pot has been accessed to date, partly because the risk profile of infrastructure projects is not attractive enough to investors.

The CBI report proposes that the government lifts the credit rating for these projects above the investment grade level of BBB-.

It argues that by using contingent liabilities to enhance the credit rating of several projects at a time rather than fully funding individual ones, the government can help infrastructure to compete with other types of investment.

John Cridland, CBI director-general, insisted the government would not be taking on the risk of these investments, but facilitating the private sector to bear the risks.

“If we get it right, infrastructure projects are very attractive to institutional investors,” Cridland told reporters at a briefing in London. “It’s a win-win because infrastructure projects offer low risk assets with reliable, inflation-link returns, which fits well with the long-term nature of pension liabilities. And for sovereign wealth funds looking to build up savings for the future, the long-term, slowly maturing nature of these assets can be very attractive.”

Among several other recommendations, the CBI said that a dividend tax credit targeted at new projects would also make infrastructure investments more attractive to defined benefit schemes.

However, it stressed that action must be taken immediately or the rebuilding of the nation’s networks could stall.

“What we can ill-afford is to have the policy in place and then face the financing crisis,” said Darryl Murphy, global infrastructure partner at KPMG. “A lot of investors have been waiting for the policy and regulatory regime to be in place – this should be seen as the key to unlock the door to future investment.”

The announcement comes just days after the Department for Business confirmed that it had appointed Lord Smith of Kelvin as the chair of the new Green Investment Bank.

The bank is expected to play a major role in driving low carbon investment and observers are waiting to see how it could be used to help reduce the risk profile of green infrastructure projects.