The UK’s largest cities will finance their own infrastructure to stem a shortfall in central government funding, the former chief executive of Infrastructure UK has predicted.
James Stewart, now head of global infrastructure at KPMG, told Construction News local councils would borrow from banks and capital markets to build vital infrastructure.
Mechanisms such as the business rate supplement and tax increment financing, which allows borrowing against rising business rate revenue, would also fund new projects.
His comments came as David Cameron announced an “all-out mission” to unblock funding, planning and regulation to get infrastructure projects under way.
Mr Stewart said: “You are going to see continuing investment in city infrastructure; not just in London, but in Leeds, which is just bringing out an investment proposal, Manchester, Bristol, Nottingham – the big 10 cities.
“But what you are also seeing is less central government funding being made available to those cities to promote regional economic growth.
“So what you will see, and we are already seeing overseas, is local funding solutions coming to the fore to allow infrastructure investment to happen.”
In Leeds, councillors were due to meet yesterday to discuss a new economic growth strategy, which includes clear plans for Housing, and supports major construction and development schemes in targeted areas across the city, such as the Aire Valley Leeds Enterprise zone.
Two weeks ago, credit rating agency Moody’s gave Birmingham City Council an Aaa credit rating. It joins Cornwall Council as a low risk for banks and capital markets.
Mr Stewart said the £15.9 billion Crossrail scheme offered an example of innovative funding, where the £4bn business rate supplement, a levy on London’s business community and £200 million from the City of London Corporation.
The government is set to reveal how £200bn of infrastructure can be delivered in its National Infrastructure Plan 2, expected in or before the Chancellor’s autumn statement on 29 November. It says 70 per cent of this will come from the private sector.
Mr Stewart said: “I hope the document continues to look long term, in terms of what our objectives and vision for infrastructure are and what we need to do to create the right conditions for investment. I think there will be some greater granularity on a project pipeline.”
IUK needs to help show the combined value of infrastructure projects in NIP2, he said. “I know they have done quite a lot of work on that.”
He welcomed the government’s £500m growing places fund, which finances smaller public projects such as a roads or bridges to unlock larger private investments, including mixed-use schemes.