Was the Cameron government naive or has the world just become a lot more worrisome in recent years? Probably a bit of both. Either way, the UK has been attempting to disentangle Chinese investment from crucial infrastructure.

Following mounting pressure from Washington, the UK decided to ban Huawei and other vendors it considered to be a high security risk from its 5G networks in 2020. In November, after months of prevaricating, the Government blocked the sale of Newport Wafer Fab, the UK’s largest semiconductor plant, to Chinese-owned Nexperia. It also bought the Chinese state-owned power group CGN out of its stake in the Sizewell C nuclear energy project in Suffolk. 

Under a long-standing deal, CGN, which the US placed on an export blacklist back in 2019 after Washington accused it of stealing American know-how for military purposes, invested in Hinkley Point C power station in Somerset; then Sizewell C, which has just been given the green light; and is still technically due to be the lead investor at Bradwell-on-Sea in Essex where it is hoping to instal its own design of reactor.

The Chinese company still retains a stake in Hinkley Point and received formal approval for Bradwell from the UK’s nuclear regulator in February. But there is growing scepticism at Westminster that the Chinese will ever be able to build on the site. 

“The Government has deliberately cast the net very wide [with the NSI Act] to make sure that it doesn’t miss anything,” says Neil Cuninghame, a partner at City law firm Ashurst, “The Government won’t actively single out China but I’m sure there’s a hierarchy where China is at or near the top of the list.”

In focusing on how the UK got into a situation where it sold off so many of its assets to foreign investors, most people fail to consider the other side of the equation: why British investors are selling up. 

It’s not like they don’t have plenty of cash. UK pension schemes, insurance companies and retail investors own assets totalling something in the order of £5.6 trillion. This is the largest and deepest pool of capital in Europe. However, just 12pc of this money is invested in the UK stock market and less than 4pc trickles down below the FTSE 100 group of the biggest companies. 

Defined benefit, or “final salary”, pension schemes reduced their allocation to UK equities from 48pc in 2000 to just 3pc last year, according to the Bank of England. Even more strikingly, less than a single per cent of the £4.6 trillion in pensions and insurance assets is invested in unlisted equities, according to New Financial. As William Wright, the head of the think tank says, it’s like The Rime of the Ancient Mariner: “Water, water, everywhere – nor any drop to drink.” 

What’s so frustrating is that, with money so tight, the country badly needs investors like pension funds and insurers with long-term time horizons directing their patient capital at the real economy. And, theoretically at least, such assets would provide exactly the right kind of return profile to meet their liabilities. 

Last year, Boris Johnson and Rishi Sunak wrote an exasperated letter to UK-based institutional investors urging them to plough a greater proportion of their money into UK assets: “It’s time we recognised the quality that other countries see in the UK, and back ourselves by investing more money into the companies and infrastructure that will drive growth and prosperity across our country.”

Earlier this year, local government pension schemes were told to set up plans to invest up to 5pc of their assets in domestic initiatives - a target so low that it mostly serves to highlight the extent of the issue. Even this prompted swift pushback from a number of schemes who pointed out the goal might clash with their fiduciary responsibilities. 

The trouble is, UK investors are not investing as they do because they are unpatriotic or believe British assets are duds. Rather it is down to a number of deep-seated regulatory and structural issues.

Most defined benefit pension schemes are closed to new members and switching from equities to bonds as the majority of their members approach retirement. Onerous regulations make it too expensive for insurers to invest in illiquid assets like private equity and infrastructure. Most low-cost retail investment products are also unsuited to these kinds of investment. 

In fairness, a good chunk of the regulatory tweaks that have been wrapped together and branded as the Edinburgh Reforms attempt to address this mismatch.

The cornerstone of this drive is Solvency II, a piece of arcane insurance regulation that most people would never have heard about were it not for the fact its reform is frequently touted as a potential Brexit dividend. Although the benefits are often overstated, it is true the existing EU rules don’t perfectly suit UK insurers. Without getting too lost in the weeds, the reforms should mean that insurers will be asked to hold less capital against long-dated investments. 

The Association of British Insurers has calculated that this might free up around £100bn in what it calls “long-term productive finance”. Whether this money will actually find its way to investments in British assets of, say, future dividend payments remains to be seen.  

Perhaps the best answer to the predicament the UK now finds itself in can be found at an intriguing “sliding doors” moment in recent British political history.

In his book “Two Hundred Years of Muddling Through: The Surprising Story of the British Economy”, the economist and author Duncan Weldon points out an apartment paradox. For all Margaret Thatcher’s reputation as a tax-cutting prime minister, the amount of revenue being collected by the Treasury during her time in charge hovered at around 40pc of GDP. How come? In a word: oil. Crude was discovered under the North Sea in the late 1960s but production didn’t really start cranking up until the late 1970s. The UK went from producing 1.5m barrels a day in 1979 to 2.7m in 1988.

During the 1980s, taxation on oil from the North Sea delivered an average of £18bn a year to the UK’s Treasury (when adjusted for inflation). “One in 12 pounds the British government received came straight from the North Sea,” writes Weldon.