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Now for the hard part: delivering this UK infrastructure plan

Bill McElroy

Now that we’ve got it, it seems bizarre we didn’t have it before.

The National Infrastructure Assessment published earlier this month is a welcome force for good in our national discussion on infrastructure. Independent and authoritative, it sets a bold and long-term vision for a UK that is better connected, more sustainable and more productive.

All of us hope that it will help simplify the politics of infrastructure planning by setting a framework for government decisions on broadband, transport, power, waste and recycling, water resilience and other crucial areas for UK plc.

For the construction and wider infrastructure sector, the bigger challenge is getting down to delivery.

The NIA lays bare the enormous demand for infrastructure investment and the funding challenges this raises. It’s an ambitious plan which needs to be delivered within a government spending envelope of 1.2 per cent of GDP (up from 0.8 per cent) and amid uncertainty on how previous European Investment Bank commitments will be met.

As the document acknowledges, finance is not in short supply and the NIA provides tools to evaluate the costs and benefits of financing options – both public and private – for new and existing projects.

Perhaps the bigger question is: can we give investors the confidence that this investment will be deployed successfully? We need to demonstrate that the UK infrastructure sector is made up of capable clients with a world-class supply chain, with the talent, skills and capacity to meet demand.

Capable clients

First of all, we need to attract a variety of private investors to participate. Clients across the piece – public and private, national, regional and local – have an opportunity to innovate and explore new funding models that are right for their programmes, thinking creatively around debt, equity and the way risk is managed.

Of course, it’s not just the shape of the initial deal that matters, but building confidence in projected returns. Capital markets need confidence that UK infrastructure clients will commission, deliver, operate and manage infrastructure assets in an efficient and effective way. Historically this has by no means been guaranteed and the sector needs to challenge this perception if it’s going to secure the right investment.

“Collaboration must involve the supply chain to address the signs of fragility in our industry”

There are positive signs that the sector is turning a corner. Following the Hansford Review, Network Rail committed earlier this year to a pipeline of PPP projects of varying sizes, potentially offering new points of entry for investors as well as regional and local supply chains. In the water sector Ofwat is strongly encouraging water companies to consider the direct procurement model, aligning investors with the success of a project through financing, design, build and operation.

We are overdue a shake-up of traditional industry models. Government and cross-industry initiatives such as the ICE’s Project 13, the Infrastructure and Projects Authority’s Project Initiation Routemap and the DfT’s Transport Infrastructure Efficiency Strategy provide clear direction for the next generation of infrastructure programmes.

As an early step, clients need to focus on ensuring that their procurement capability is ready to meet this challenge and improve the way we design collaborative, long-term public-private partnerships.

Creating a world-class supply chain

This collaboration must also involve the supply chain to address the signs of fragility in our industry.

Under these new models for delivering infrastructure, investors and clients should offer the supply chain earlier market engagement, fairer allocation of risk and reward, and greater certainty over future investment. This is essential to encourage businesses to make their own investment in talent, skills, technology and the overall capability we need to deliver infrastructure on time, on budget and to world-class standards.

Under this longer-term approach, we may finally begin to make inroads into construction’s productivity problem and start moving towards a mentality more akin to that of the manufacturing sector.

The NIA sets out a positive route map for change. We now need the government, clients and the supply chain to commit and collaborate to prove that the UK infrastructure sector can deliver.

Bill McElroy is head of industry strategy, programme advisory at Turner & Townsend

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