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Is The UK Government Meeting Its Promises On Infrastructure Investment?

04-05-2011 03:50 PM CET | Business, Economy, Finances, Banking & Insurance

Press release from: InfraNews



By Brendan Malkin

Just 15 seconds into his Comprehensive Spending Review (CSR) speech last October, George Osborne, the UK’s chancellor, trumpeted the need for “prioritising” investment into infrastructure. This set the tone for the rest of his speech, in which he announced plans to invest a whopping GBP200bn into the UK’s economic infrastructure and renewables sectors over the next five years.

In the budget announced a couple of weeks ago, Osborne said the word infrastructure only the once. This, in part, was probably because he had said all he wanted to say about infrastructure in his CSR speech. However, it also reflected where his current priorities apparently lie.

A glance at some of the capital projects currently in procurement would suggest that the infrastructure sector, while not as healthy as it was two years ago, is far from being in decline. In truth, however, the market appears to be ailing.

First, consider the UK’s social infrastructure sector. On the face of things, it looks as if it is going through something of a resurgence following its sharp decline after the end of New Labour’s reign. Take hospitals, for instance. A business case is currently under preparation for a new GBP120m paediatric hospital at Addenbrooke’s Hospital in Cambridgeshire; in June, draft final bid submissions are due in for the GBP288m Alder Hey Children’s Health Park PFI in Liverpool. Meanwhile, three consortia have been selected for the new Cambridge Biomedical Campus in Papworth. All this would suggest that the UK’s coalition government is intent on investing into hospital infrastructure.

Not necessarily, however. All these projects were inherited by the coalition from New Labour and do not reflect any urgent commitment to invest large sums in new projects. “These are legacy hospital projects,” said Nick Prior, a partner at Deloitte. “They reflect the government policy of cutting back some projects and keeping what they can.”

Meanwhile, the possibility of further capital investment into UK schools looks even shakier. A government review group is due to report on this investment programme by Easter. “However, we don’t know whether this is Easter this year or Easter 2012,” said one industry source. Another source said: “If you work for an investment company that has been used to building schools for the last five years, life is looking a bit grim.”

Economic Infrastructure
And what of the government’s flagship economic infrastructure plan? Again, there is a number of transport projects being procured, including various large-scale highway maintenance programmes, the Nottingham Tram PFI, Crossrail, IEP and Thameslink. High Speed II has also been given the green light. In addition, in its National Infrastructure Plan (NIP), published last October, the government earmarked investment for at least 35 transport-related capital schemes. The chancellor also announced in his budget speech this year that he is committed to investing GBP30bn in transport projects over the next four years. This is all well and good. Dig away a bit and a different picture altogether emerges. Again, all of these projects are legacy schemes. “They have been around for a while and didn’t get cut when the coalition came into power,” said one senior industry source.

Furthermore, many of these projects involving extending or building railway stations and road widening schemes. Such schemes are not only largely small scale, they are also difficult to manage, industry sources say. Therefore, attracting private sector investment, if indeed that is what the government is hoping to do, will not be easy.

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