This recovery could easily go off the rails

Every newspaper seems to be full of the latest news on the economic recovery in the UK. Only three months ago it was all still dark and tough in the UK, with everyone in a trough, in contrast to the US where things were picking up sharply.

Then, even here things started to ease, (although some are still questioning if the recovery is sustainable, and whether it will be swift or slow), and there is no doubt that orders of around the £1m to £25m range have picked up over the last three months.

Long may it continue, but while this type of work sustains some jobs and well-being in the economy, it is mainly from artificially “stimulated” housing work and we can’t rely on this alone.

While it is great to have a growing “middle market” it is worrying that the heavy infrastructure market is still falling away. The country will suffer in the medium term from a lack of infrastructure investment.

Big expenditure programmes from Network Rail, TfL, the Highways Agency, Heathrow and, of course, Crossrail are great but many of the bigger projects are now mostly let.

We need major projects now if our industry’s fragile recovery is not to be threatened.

While there is political consensus on the value of big infrastructure, there is little agreement on which projects should be funded or even go ahead.

After the election there is always a period of six months or so as our hard-pressed civil servants grapple to understand any new government’s agenda.

And look at HS2: holed below the water-line by early electioneering and struggling for affection in the eye of the general public.

This struggle is a great pity as our industry worked hard and geared up well for Crossrail.

I am not sure what it is that causes the UK to have a national case of hiccups whenever a major scheme draws near

But it has not managed to get the continuity to follow those schemes - even the Thames Tideway Tunnel is now unlikely to provide sensible continuity for tunnelling resources.

Much of the industry will struggle to keep going at its current rate and will need to downsize that capability in 2014.

Sir John Armitt’s recent independent report recommends that infrastructure of national significance should be agreed well in advance of need and protected from the whims of politics.

This is a sensible recommendation but it still leaves the industry looking for a short-term “bridge” from today to tomorrow’s elusive programme of government infrastructure work.

Don’t forget this was promised in the set up of Infrastructure UK as part of our nation’s road to economic growth.

I am not sure what it is that causes the UK to have a national case of hiccups whenever a major scheme draws near.

There are investors armed with tens of billions of pounds out there who cannot find the projects to support here so they go naturally to countries such as Canada and the USA, which have plenty of appetite and schemes for growth.

As a nation this has to be to our serious disadvantage, damaging future competitive edge.

To avoid a “double dip” when the current big schemes conclude we need to find ways to stimulate the construction economy more actively through 2014.

So what could we do today? We could encourage additional investment in schemes through wider application of the government’s “guarantee” for major infrastructure as the insurer of last resort.

Government departments, (health, education, environment), could move forward their planned programmes of work from 2016 to start next year and release those works to market using contractors’ early engagement, (just as the Cabinet Office’s own report nearly two years ago recommended).

Then the “independent” regulators could provide enhanced returns in the utility and rail RABs over the next two years, in return for additional investment levels in marginal schemes.

Also we could encourage local authorities to secure private funding under a simplified form of DBFO and invest in modest infrastructure, things like the greening of local authority premises, and encourage government’s private investment in new energy generation schemes by advance purchase of any surplus energy capacity.

I am sure we all have some ideas - it might be helpful to bring these forward through the CBI, UKCG, ACE and other offices and have them press harder on government for action before the industry’s fragile return to health is threatened.

Nick Pollard is chief executive of Balfour Beatty Construction Services UK