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Investment is up yet infrastructure output has flatlined

There is growing consensus that the UK must get better at delivering infrastructure.

This month the National Infrastructure Commission (NIC) set out its first ever National Infrastructure Assessment, an independent analysis of the UK’s infrastructure requirements up until 2050.

The NIC laid out the scale of the challenge that both the industry and the public sector faces to deliver the next generation of national infrastructure. This includes everything from preparing the road network for electric and autonomous vehicles, through to investing in renewable energy and ensuring flood resilience to mitigate the impact of climate change.

However, while successive governments since the 2008 financial crisis have committed themselves to greater investment in infrastructure, and despite current record levels of investment, the impact to date of this extra funding on the construction supply chain has been minimal.

Just £70 more

Launched ahead of the National Infrastructure Assessment, Scape’s Essential Infrastructure report reveals that between 1997 and 2017, the UK’s construction output (the value of construction activity on public and private infrastructure projects) has increased by just £6.4bn – the equivalent of only £70 per person across the country.

The research also provides a different perspective on the regional balance of infrastructure schemes, with areas in the North seeing significantly greater output of infrastructure relative to their populations than in London.

The North-east, for example, saw 40 per cent more infrastructure output per person than the capital. Across the UK, Scotland saw the highest infrastructure output per person over the two decades, and 54 per cent more output than London.

“There is a great opportunity to put social value at the heart of a new infrastructure strategy, as projects support SMEs and can provide apprenticeships”

While it is positive to see that the UK’s regions are catching up to London in terms of output, it is clear that record investment nationally in infrastructure has not led to a significant increase in construction activity on the ground.

This is important because infrastructure projects not only provide better connections or facilitate essential services like the delivery of water or energy, they also support local economies through the creation of jobs and by supporting the supply chain, especially for SMEs.

Everybody wins

With Brexit on the horizon, it is more important than ever that the government commits to both short-term and long-term infrastructure projects. This will provide not only a visible pipeline for tier one contractors allowing them to invest in their operations, but also stability to the supply chain in the short term, while also ensuring the UK’s regions are attractive places to invest for the long term.

Smaller road and rail projects are just as vital as big-ticket projects, such as HS2 and Crossrail 2, to keeping towns and cities on the move and providing work for the local supply chain.

There is a great opportunity to put social value at the heart of a new infrastructure strategy, as infrastructure projects support SMEs and can deliver skills by providing apprenticeships for local communities.

Metro mayors and local enterprise partnerships have a critical role to play in delivering infrastructure, as identified by the NIC, but can also drive the delivery of social value at a local level. This local social value delivery will become increasingly important in the run-up to Brexit and beyond.

In addition to the recommendations of the National Infrastructure Commission, there are four further steps we must take to improve output and ensure delivery of essential infrastructure across the UK:

  • A removal of retentions throughout the industry and a commitment from clients to ensure payments to tier one contractors within 14 days, for contractors to pay tier two suppliers within 19 days and tier three suppliers within 23 days, improving upon the current requirements of the Construction Supply Chain Payment Charter.
  • A commitment to driving forward the devolution agenda to support the joined-up delivery of infrastructure.
  • A widening of the NIC’s remit to prevent the ‘politicisation’ of infrastructure decisions.
  • A commitment to ensuring that all public sector contracts valued at £10m or more produce at least 20 per cent of that figure in social value to the community.

Mark Robinson is chief executive of Scape Group

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