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Exclusive: Government adds £63bn to its construction pipeline in just seven months

The government’s construction pipeline has soared by nearly 53 per cent in the last seven months but questions have been raised over its delivery.

There are now 14,705 government-funded projects in the pipeline covering March 2016 to 2020 and beyond, worth a combined £181.36bn, according to research by KPMG.

This is £62.64bn higher than KPMG’s previous government pipeline analysis, released last August.

But high-profile industry figures have questioned how many of these projects will be delivered and where the funding will come from.

Speaking to Construction News, KPMG head of infrastructure, building and construction Richard Threlfall welcomed the increase in the pipeline, but said that the government’s focus now needed to be on delivering these schemes.

“The pipeline is effectively a collation by government of programmes that are sometimes being run by government departments, and sometimes at a local level,” he said.

“The degree of ability of anyone in these government departments to compel these things to happen, certainly to timetable, doesn’t really exist.”

Government construction pipeline graphic May 16_KPMG

Government construction pipeline graphic May 16_KPMG

Source: KPMG

The majority of the additional work will come from the transport sector, which has added £32bn to the pipeline largely through the addition of HS2.

However, cabinet secretary Sir Jeremy Heywood and Treasury officials are now conducting a review into the cost of the £50bn scheme.

An additional £15bn has been added to the education sector, driven by increased spending from the government’s ‘Investing in Britain’s Future’ programme.

There is also an extra £10bn of work in the energy sector due to further nuclear decommissioning work.

One source at a major forecaster warned that not all the work was guaranteed to go ahead, adding that the government’s pipeline “reads more like a wishlist than anything else”.

He added: “It’s very difficult to discern what is going to go ahead and what isn’t.

“The government wants to get HS2 done, and nuclear decommissioning needs to be done, but around education there are doubts where the funding comes from.”

There were also suggestions that the £1.4bn of housing in the government pipeline may not all be delivered.

The government has made £1.2bn of funding available for local authorities to remediate brownfield land to be used for Starter Homes, but industry sources say that “there are no guarantees” that all of this would be spent.

Mr Threlfall added: “The pipeline isn’t just trying to pick up fanciful schemes, but spending that is committed, so I think [it’s a realistic] programme at that level.

“It’s all very well for organisations to sign up to do things, but ultimately it’s whether they crack on and deliver them to their plans that really matters to the market.”

The update comes after prime minister David Cameron warned that the UK could lose “billions of pounds in infrastructure funding” if it leaves the EU.

He said that an EU exit would terminate Britain’s membership in the European Investment Bank, which has invested over £16bn in UK projects over the past three years.

But Mr Threlfall said the pipeline’s headline figures were “not directly related” to any Brexit scenario.

“These are UK government and public sector-funded schemes, so there isn’t a direct relationship between them and a Brexit debate.”

Much of the pipeline’s additional spending is pencilled in for the long term, with 79 per cent of the additional £62.64bn factored in from 2020 and beyond.

However, the total pipeline to 2020 has still increased from £78.42bn in August last year to £91.84bn as of March 2016.

Transport (£92.2bn), energy (£32.3bn, not including private funded projects), and education (£27.9bn) make up the three largest sectors in the government’s current pipeline, followed by the Ministry of Defence and science and research (both £6.9bn).

Across the sectors, there is £1.4bn of housing work to be completed before 2018, including £1.1bn relating to affordable housing programmes across England, while in the health sector there are 10 large NHS-led capital programmes worth a total of £2.2bn.

The South, including the South-east, South-west and London, makes up 13 per cent of the total pipeline at £22.8bn, closely followed by the North, which constitutes £20.7bn.

The North-west makes up £15.2bn of the pipeline – more than London at £9.7bn and the South-east at £8.6bn.

There are currently 220 government-funded transport projects in the North of England’s pipeline, worth a total £5.8bn, with energy representing the largest sector in the region overall, accounting for £9.9bn – primarily from nuclear decommissioning work.

Work in the Midlands has remained relatively flat since the last pipeline, with £11bn of projects making it the fourth-largest region by value.

There is also £1.9bn of projects in the pipeline across Wales, Scotland and Northern Ireland, largely from the defence, justice and police sectors.

Earlier this year, the government released its latest iteration of the National Infrastructure Pipeline, now titled the National Infrastructure Delivery Plan, which sets out £483bn of projects from 2016 to 2020 and beyond.

The National Infrastructure Pipeline covers projects backed by either public, private, or a mix of public and private funding.

KPMG’s research focused solely on publicly funded projects.

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