Launched in July 2012, the government’s UK Guarantees Scheme aimed to kick-start critical infrastructure projects that may have stalled because of adverse credit conditions.
The difficulty of obtaining infrastructure financing had already been identified as a key problem by ministers and officials.
Events have moved on in the past 18 months, however, with some things changing, while others remain the same.
Firstly, and most obvious change we have seen, is perhaps the early signs of a return to sustainable economic growth.
“While the news that 40 projects are in the process of applying for a guarantee is welcome, there is an opportunity for even wider roll-out of the scheme”
Unemployment continues to fall, while growth figures of 0.8 per cent in the third quarter of 2013, though not spectacular, represent reasons to be positive about the coming years.
The updated National Infrastructure Plan, published alongside the autumn statement, also contained a number of surprises, specifically around the UKGS.
While movement on flagship projects like Hinkley Point C and the Northern Line extension were restated, new announcements were made on another nuclear plant in Wylfa, North Wales, and that 40 projects were now ‘pre-qualified’ under the scheme, providing thousands of jobs in the industry.
As the industry co chair of the National Infrastructure Plan Strategic Engagement Forum (co chaired on the government side by Danny Alexander, chief secretary to the Treasury) I agree these moves to growth and delivery of flagship projects are welcome changes.
Major issues remain
My concerns, however, are focused on those things that have not changed for the better.
At the start of this year, Paul Deighton was appointed commercial secretary to the Treasury with a remit to improve working between Whitehall departments and to speed up the delivery of government infrastructure programmes.
“If there is an opportunity to work together and overcome these sensitivities, the process would benefit more than it would lose”
While he has had success (movement on HPC and renewed drives on the Thames Tunnels and High Speed 2 stand as evidence of this), project delivery remains a concern.
So what can be done to further improve the impact of the UKGS?
While the news that 40 projects are in the process of applying for a guarantee is welcome, with an additional 200 of the 577 projects listed in the National Infrastructure Plan apparently eligible for a guarantee under the UKGS, there is an opportunity for even wider roll-out of the scheme.
Work out sensitivities
The government has also been understandably reluctant to identify which projects are eligible for a guarantee under UKGS, citing sensitivities around commercial negotiations as the reason.
We feel, however, if there is an opportunity to work together and overcome these sensitivities, the process would benefit more than it would lose from this information.
“There is now a chance to learn the lessons and improve the process, now there are exemplar projects that have gone through the UKGS”
Those involved with the projects in question would know they could utilise this facility and get on with delivery, rather than languishing on the drawing board because of a lack of finance.
Finally, there is now a chance to learn the lessons and improve the UKGS process, now that there are exemplar projects like Drax and the Northern Line Extension that have gone through the UKGS. This will make the scheme both more effective, and more attractive, as simpler processes are initiated.
The Treasury has used the recent update of NIP to restate the case for the UKGS, and provide more detail on how it is performing.
There are now opportunities to look again at the calibration of the scheme, particularly in light of the improved economic conditions and the increased availability of private sector finance that seems to have, anecdotally at least, accompanied it.
Nelson Ogunshakin is ACE chief executive and NIPSEF co-chair