When the chancellor announced his plans for growth last month there was much for construction to welcome. But, as the pound fell and markets wobbled, any positives were almost entirely obscured, Daniel Gayne reports
Given the chaotic few weeks that have followed Kwasi Kwarteng’s mini-Budget, you would be forgiven for having forgotten that the chancellor’s growth plan included a major commitment to accelerating the consent process for nationally important infrastructure – alongside a list of 138 priority projects.
Other elements of the fiscal statement – namely the huge unfunded cuts to the top rates of income tax and stamp duty – grabbed the headlines, before triggering a crash in the value of the pound and nearly collapsing pension funds. This bedlam was provoked in the name of an agenda of “growth, growth, growth”, but neither the public nor the experts appear to have been convinced, with prime minister Liz Truss’s poll numbers tanking and Deutsche Bank analysts predicting that the UK will not return to pre-covid growth levels until 2024.
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Government has often turned to infrastructure as a reliable engine for growing the economy and, while Kwarteng’s promises in this area were warmly welcomed by the sector, the disarray in the market has taken the sheen off this win, leaving industry leaders no less nervous than they had been prior to the announcement.
A survey released by the Association for Consultancy and Engineering (ACE) the week before the fiscal statement revealed that half of the organisation’s members were unsure whether the industry could cope with the levels of uncertainty in the economy, citing client confidence and wage inflation as major concerns.
Those projects to be expedited are by and large already within the national infrastructure and construction pipeline
Dave Beddell, chair, Association for Consultancy and Engineering
ACE chair Dave Beddell says the mini-Budget was an “opportunity to reassure industry” and that the promise to accelerate 138 projects – including transport, energy and digital infrastructure – did do that “to some degree”.
However, he notes: “There was nothing of material difference in the sense that those projects to be expedited are by and large already within the national infrastructure and construction pipeline, published by the Infrastructure Projects Authority.”
Alasdair Reisner, chief executive of the Civil Engineering Contractors Association, says the priority projects listed are “quite sensible, relatively small-scale” schemes that are “quite evenly spread geographically” and “can be done reasonably promptly”.
However, he notes that the government has “not made the task too hard for themselves”, with some of the schemes listed being effectively under way already.
The devil, of course, is in the detail, and there is broad consensus in the industry that the government should be judged on the specifics of how it plans to speed up delivery of major infrastructure.
Documents published alongside the growth plan describe vaguely how a new planning and infrastructure bill would minimise the burden of environmental assessments and make consultation requirements “more proportionate”, as well as introducing sector-specific changes to accelerate delivery of onshore wind and a streamlined consent process for roads.
Reisner says industry and government need to be “quite careful” in reforming environmental protections. “What we don’t want to say is, ‘let’s just ride roughshod over the public and nature’, [but] we should have planning that is rapid in a way that still addresses these issues,” he says, adding that the government needs to take a look at its own role in planning delays. “Too often one of the delays is decisions sitting on ministers’ desks and not being progressed, often, it seems for political reasons, rather than for policy reasons.”
David Whysall, managing director of infrastructure at Turner & Townsend, agrees, saying: “Speed doesn’t have to mean jeopardising sustainable infrastructure […] speed in infrastructure is about getting clarity of investment, taking some of the politics out of it.”
Jonathan Spruce, trustee for policy and external affairs at the Institution of Civil Engineers, says the industry believes in the government’s commitment, but that there is “increasing frustration” that commitments to projects are not being quickly followed up by delivery mechanisms. He cited the example of the £96bn Integrated Rail Plan (IRP), for which the government has yet to reveal a delivery plan 11 months after it was first published.
What is more, there will undoubtedly be concerns about the security of long-term infrastructure spending, given the fiscal position the government has put itself in. Spending cuts to demonstrate the government’s fiscal responsibility are almost an inevitability now, and after stirrings of discontent within the Conservative Party at the idea of cutting benefits during a cost-of-living crisis, some Tories have suggested that projects such as HS2 should be first for the axe. Indeed, there has been speculation that Liz Truss’s recommitment to delivering the full version of Northern Powerhouse Rail (NPR) – contrary to the diluted version put forward in the IRP – could be an attempt to head off northern outrage at a future cut to the more expensive second phase of HS2.
Beddell, who also works as director of growth for Europe and India at Aecom, views the NPR announcement as “genuine grounds for optimism”, while admitting that the sector is “absolutely” nervous about the possibility of cuts. “As a sector, we’ve been here too many times not to understand the reality of political economics, and new roads and railways don’t win hearts and minds when stacked up against declining public healthcare and increased living costs,” he says.
There is a worry that, because we are not moving quickly on it, you might have to sacrifice some of the schemes to balance the books
Alasdair Reisner, CEO, Civil Engineering Contractors Association
Spruce and Reisner, meanwhile, both point out that the pace of delivery on infrastructure is a major factor in its affordability. “You’ve got this almost vicious circle, whereby projects potentially get delayed a little bit and therefore are at the mercy of some of the market forces around inflation and resources, which means that then there is potentially a risk to some of those projects,” says Spruce. “There is a worry that because we’re not moving quickly on it, you might have to sacrifice some of the key schemes to balance the books”. Reisner says it “doesn’t make a lot of sense to cut investment in infrastructure”, given its proven economic returns. He is concerned about projects going on a “go-slow” if delays mean they cannot deliver on the budgets originally set.
In the fortnight since the announcement, Truss and Kwarteng have been forced into a succession of U-turns – first dumping the cut to the top rate of tax, before agreeing to bring forward the date of a new fiscal statement, which will be focused on spending and deregulation, from 23 November to 31 October in an effort to restore market stability.
The reversal means the chancellor will have another opportunity to settle industry nerves later this month, and Reisner says there needs to be “a clear demonstration that the government knows what it is doing, rebuilding confidence both with markets and the public so that we don’t end up in a severe crisis later this year”. Spruce says he wants to see a guarantee that long-term capital infrastructure spend will be maintained and greater clarity on the development of delivery programmes for rail and energy investments.
Looking beyond the October statement, Whysall wonders whether the government could be more ambitious when it comes to the quantum of investment, suggesting that there is scope to scale up spending to the 3% of GDP level targeted for defence spending. “Defence spending at this time feels absolutely the right thing to do, but if you think of infrastructure in the context of decarbonisation, a more levelled-up society, strong economic growth, it feels like there’s more perhaps that we could be investing,” he says.
Whysall notes that the UK is in a global competition for talent in the megaprojects market and that industry cannot attract, retain and train talent without confidence in the pipeline of work.
“If the UK doesn’t provide that ambitious platform and plan and doesn’t make that investment then some of those people will go to California and high-speed rail or the city metro, or to the Middle East to build new cities, or they will go and work on other major complex projects around the world,” he says.
Spruce says that such a talent drain would be difficult to reverse, recalling how the Blair government struggled with its programme of rail electrification because so many engineers had left the industry after the economic downturns of the early 1990s.
“What the industry loves and cries out for is that certainty of delivery, because then it can gear up, it can upskill and it can properly deliver on efficiencies, through things like the Construction Playbook, and through transforming infrastructure performance,” he says. “Industry stands ready to deliver – but let’s crack on and deliver.”
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