Report recommends government spend 1% of GDP on infrastructure for the next five years

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Infrastructure investment now would boost the whole UK economy by £100bn a year by 2026, a report has concluded.

The research conducted by the Centre for Economic and Business Research (CEBR) has found the UK’s decrepit infrastructure is currently losing the economy £78bn a year.

The report, commissioned by the Civil Engineering Contractors Association (CECA), concluded that the government should set a floor to ensure infrastructure spending does not fall below 0.8% of GDP to enable the UK to catch-up to its international competitors.

The report ranked the UK’s infrastructure  24th among its competitors, behind Switzerland, Germany, Oman and Korea.

Daniel Solomon, CEBR economist and author of the report, said the UK had “paid a high” price for its lack of infrastructure.

He added: “We estimate GDP might have been about 5% higher over the past decade if the UK’s infrastructure quality had been in line with countries like Switzerland and the Netherlands.

“This research has shown that improving UK infrastructure quality could help us to catch up with some of the world’s most competitive countries, giving UK businesses the connectivity they need to add real value to the economy.”

The report found that for every £1bn spent on infrastructure construction increased GDP by £1.3bn. Plus, it said every 1,000 direct jobs created in the infrastructure construction boosted wider employment by 3,050.

The report also found that infrastructure spending had fallen below 0.8% of GDP in 2003 and although it returned to over 0.8% of GDP in 2009 the country still had a shortfall of £13.1bn of infrastructure investment.

CECA said the government needed to aim to spend 1% of GDP on infrastructure over the next five years to make the UK competitive.

Alasdair Reisner, CECA’s director of external affairs, said: “This is not a problem that is acceptable to pass on to the next generation.

CECA’s complete list of recommendations

  1. Government to establish a formal threshold for new infrastructure investment, ensuring that it does not fall below 0.8 per cent of GDP, the level at which significant detrimental impacts are created for the wider economy.
  2. UK government to target new infrastructure investment to be at or above 1 per cent of GDP over the coming five years, to stimulate growth and close the gap in the quality of UK infrastructure compared to international competitors.
  3. UK government to create an independent body to analyse strategic challenges facing the UK, and to identify how infrastructure can play a part in resolving these concerns.
  4. UK government to promote prudential borrowing for local authorities to address their highways maintenance backlog through a one-off national programme of intensive improvements to local roads, significantly reducing the long-term cost of maintaining the network.
  5. UK government to commit to a clear, long-term energy policy that provides certainty about the types of investment that will be required to update the UK’s generation and transmission capacity, releasing significant private sector investment.
  6. UK government to develop a preparation pool of infrastructure projects that can be rapidly delivered, following a model successfully implemented by the Scottish government.
  7. UK government to expand the reduced ‘project rate’ of the Public Works Loan Board from one to three projects per Local Enterprise Partnerships in England, and implement by November 2013. Require authorities drawing on the rate to demonstrate substantial private sector co-investment in funded projects.
  8. Industry to work with government in England, Scotland and Wales to identify and resolve non-financial barriers that are blocking construction of local infrastructure projects.
  9. UK government to develop a new model for the ownership and management of the strategic roads network, focussing on providing long-term certainty over the investment required in the network to ensure that it is able to meet future demand in an affordable manner.
  10. UK government to make an early commitment to commence work on Crossrail 2, addressing the long term transport capacity issues in London.

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