Getting the UK building again

Infrastructure was a major focus of the Queen’s Speech earlier this month, as the government put forward new legislation designed to encourage investment in the sector.

Not before time, perhaps, as a review last year by Sir John Armitt pointed out there is growing evidence the UK’s infrastructure has not been renewed or enhanced when needed.

“Indeed in 2012, the World Economic Forum ranked the UK 24th for the overall quality of its infrastructure,” Sir John continued.

Causes for concern include:

  • Fears that the cost of traffic congestion in the UK could rise to an estimated £36 billion a year by 2025;
  • The threat posed to the UK’s position as an international aviation hub by a lack of investment in runway capacity in South-East England;
  • That a fifth of the UK’s electricity generating capacity is due to come offline within ten years;
  • And the fragility of the UK’s water supply, demonstrated by the droughts of 2011 and 2012.

Prime Minister David Cameron acknowledges the problems and has highlighted the importance of the infrastructure sector to the UK’s economy and future prosperity.

In a 2012 speech to the Institution for Civil Engineers, Mr Cameron conceded: “The truth is we are falling behind; we are falling behind our competitors and we are falling behind the great world-beating, pioneering tradition set by those who came before us.

Confidence is building in our ability to deliver, but we need to attract funding to keep the momentum going

“There is now an urgent need to repair the decades-long degradation of our national infrastructure and to build for the future with as much confidence and ambition as the Victorians once did.”

Yet little action followed those stirring words because of the need to tackle the UK debt crisis. However, there are now signs that the sector is picking up after a period of retrenchment, which came about as a result of the most serious financial crisis since the Second World War.

“We are at a moment when there is a need for renewal. UK infrastructure is still in recovery mode, but it is showing greater signs of life month by month,” says Steve Morriss, chief executive for Europe, the Middle East and Africa at engineering consultancy Aecom. “There is some pretty exciting stuff going on.”

The extent to which the Prime Minister’s words have been translated into action will be revealed in the State of the Nation: Infrastructure 2014 report due to be launched tomorrow by the Institution of Civil Engineers, which will assess the government’s progress on infrastructure development since 2010 and grade each infrastructure network from A to E.

In its last report in 2010, energy and local transport were graded D “at risk”, so those sectors will be under the spotlight this time around. There will also be a focus on flood defences given the impact of the winter flooding.

According to the Department for Transport, the government’s current Infrastructure Bill, outlined in the Queen’s Speech, should help to create stable long-term funding for work on the country’s major road network, ensuring smoother, quicker and quieter journeys. The Bill should also make it easier to sell surplus and redundant public sector land and property to help build more homes on brownfield sites,

“Investment in infrastructure is central to the government’s long-term economic plan and that is why we are spending almost £73 billion over the period 2015 to 2021 on transport alone,” says Transport Secretary Patrick McLoughlin. “This Bill will hugely boost Britain’s competitiveness in transport, energy provision, housing development and nationally significant infrastructure projects. These powerful new measures will drive investment, making it easier, quicker and simpler to get Britain building for the future.”

“There is an element of catch-up,” says Professor Denise Bower, chairman of the Institution of Civil Engineers and executive director of the Major Projects Association. “The rate of spend had dropped, but it is now picking up again.”

Major projects under way or mooted include Crossrail, the High Speed 2 (HS2) rail route and Thames Tideway Tunnel. The sector is also benefitting from the success of the London 2012 Olympic Games, and the delivery of the facilities without the disruption and chaos that have dogged other major events, such as this year’s football World Cup in Brazil.

“As a nation, the Olympics helped recreate a belief in Britain’s ability to take on these challenges and deliver a complex urban development in a relatively short period of time,” says Andrew Comer, a partner in the environment and infrastructure practice at engineering consultants Buro Happold, who worked on the Olympics.

“There is a more positive mood,” says Professor Bower. “We delivered the Olympics on time and on budget, and Crossrail is going well. Confidence is building in our ability to deliver, but we need to attract funding to keep the momentum going.”

Meanwhile, the industry is confident that many of the lessons being learnt on the Crossrail project, particularly in relation to complex tunnelling, will make the development of HS2 run more smoothly, when it is finally approved.

Yet there is also a feeling in the industry that the market needs more certainty and quicker decision-making from policymakers, who favour infrastructure because it has the potential to create jobs and enhance other areas of the economy. But politicians seem unable to take the difficult decisions that are needed because they have one eye on the political calendar.

Part of the problem is that infrastructure is intrinsically a long-term issue, with projects taking many years to plan, finance, build, operate and then decommission.

“Taking the long-term view, it is easy to see that these projects are great for the country, but in the short term they are often expensive and controversial,” says Aecom’s Mr Morriss, citing the need for more capacity at Heathrow Airport as a prime example of where more rapid decision-making is needed.

In this regard, the National Infrastructure Plan, introduced by the Coalition government, has helped – to an extent. It sets out the priorities and framework for infrastructure needs in the UK. “It’s a good starting point,” says Richard Laudy, head of infrastructure at Pinsent Masons, a law firm specialising in the sector. “But a number of commentators feel that it is very much a wish list that does not really tackle some of the big issues around need and funding.”

The infrastructure plan is “only a list of the key projects likely to be delivered over the next four to six years”, agrees Mr Comer. “No one has really grasped the nettle and started to think more strategically about what the country needs in the long term.”

Like the Armitt review, Mr Laudy suggests setting up an independent body, along the lines of Australia’s National Infrastructure Commission, which is addressing tough questions around priorities in a country that has a major infrastructure deficit like the UK. “But they have taken the whole debate away from politicians and have independent people making the decisions,” he says.

Professor Bower concludes with a note of caution: “I am not sure the answer is just to build more things. Smarter asset management is absolutely crucial. It is about thinking more intelligently about what we want and how to get there.”