The Autumn Statement is a welcome step in the right direction – but more is needed to deliver the Government’s ambitions for UK infrastructure
November 24, 2016
It’s hard to argue against the widely-held view that the UK has been underinvesting in infrastructure for decades – not least in its transport links. Against this background, the Chancellor’s commitment in the Autumn Statement to allocate £1 billion to small “shovel-ready” schemes such as local road improvements is clearly a much-needed and welcome move.
However, the Autumn Statement represents only one stage on the UK’s long journey to an infrastructure base fit for the 21st century. And in PwC’s view, much more is needed if the destination that the Government has mapped out is to be reached.
On the positive side, it’s clear that – for the first time in many years – we now have an administration that’s serious about tackling the UK’s long-standing infrastructure challenges. The creation of the National Infrastructure Commission and Infrastructure & Projects Authority point to a renewed readiness both to get to a firm grip on the nation’s infrastructure needs, and also to ensure the wherewithal is in place to meet those needs effectively and efficiently. In the coming months, these building-blocks are set to be supported and strengthened by a new, integrated Industrial Strategy aligned with the same goals.
Equally positively, this revitalised focus on infrastructure reflects a recognition that greater connectivity in general – and improved infrastructure in particular – are vital enablers of economic development, growth and jobs across the country. Forging stronger connectivity is all the more vital at a time when the Brexit vote has highlighted the degree of disenchantment and exclusion felt in many regions of the country from the benefits of growth at a national level.
Crucially for businesses involved in capital projects and infrastructure, the Autumn Statement also highlights the Government’s recognition of something else. It explicitly accepts the need for a blended portfolio of projects going forward – one that includes not only a handful of high-profile, multi-billion pound megaprojects like HS2 that will deliver benefits in years and decades to come, but also a plethora of smaller schemes to be pursued at a local level.
Why are the smaller schemes so vital? For two main reasons. First, they can be undertaken far more quickly than megaprojects, meaning their positive impacts on economic activity, jobs, connectivity and social cohesion kick in that much faster. And second, they can be dispersed widely across the country, delivering targeted benefits where they’re most needed, and supporting the drive towards regionalisation and devolution of decision-making.
However, even with the right balanced portfolio of projects identified and put into the planning pipeline, challenges remain around project execution. And to help deliver all the infrastructure that’s now being planned for the UK, there are clear opportunities to improve the infrastructure delivery process in ways that will drive both enhanced execution and higher value for the taxpayer.
To deliver these improvements while also alleviating the pressure on Government finances, it will be important to encourage investment from the private sector. There’s a growing appetite for investing in UK infrastructure – and the right approach to regulation and risk-sharing can ensure private investors will be ready and willing to get more involved, including in funding greenfield projects.
To strike the right balance between being attractive to private investors and offering value-for-money for the taxpayer, greater confidence and certainty will also be vital. So for the Chancellor and wider Government going forward, a key area to focus in delivering the infrastructure plans set out in the Autumn Statement will be on creating more stability and visibility around policy and regulation. Steps to improve the UK’s base of project-relevant skills would also be valuable.
If undertaken, these initiatives will help the market to gain the confidence to build sufficient capacity to implement the planned projects, while also investing in the skills, technology and R&D needed both to execute projects at home – and also to mount a concerted export drive to capitalise on the UK’s world-leading infrastructure capabilities in overseas markets.
The Autumn Statement is an unambiguous and positive step forward down this road. But if the Government’s laudable ambitions for the UK’s infrastructure base are to be realised, the real hard work may be only just beginning.