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Assessing the challenge of infrastructure funding

In recent years upgrading the UK’s infrastructure networks has moved towards the centre of the political agenda.

Last year’s first National Infrastructure Plan set out the factors driving this need, including competitiveness, energy security and climate change. It also identified its financial scale: £200 billion over five years.

The government says more than 70 per cent of this cash will come from private sources, so with fierce global competition for these funds, the government needs to focus on making the UK as attractive as possible for investors.

There has been plenty of rhetorical commitment from ministers on shifting to the role of facilitator of investment, and there are some pockets of good practice - the work of the Office for Nuclear Development within the Department of Energy and Climate Change being one example.

However, for many of our infrastructure networks there is a lack of long-term strategy and poor visibility of the short-term pipeline of work.

UK infrastructure developers also face issues around planning, and increasing political attacks on PFI - a model which, for all its faults, has shown it is able to deliver projects.

And while infrastructure has been identified as a driver of economic growth over wide geographic areas, proposals for Tax Increment Financing aside, we have not found enough ways to translate this benefit into a direct return for investors.

So there is much to be done, and if investors are to be stopped from drifting away, this autumn’s two big set piece political announcements - the second iterations of the Plan for Growth and the NIP - need to be more substantive than their predecessors.

In particular NIP 2 must fulfil the earlier commitment to produce and maintain a two-year pipeline of approved public sector and regulated utility new-build and maintenance projects - and ideally extend it beyond two years.

The pipeline should also be a coherent, cross-sector plan and not simply the sum of departments’ and agencies’ forward programmes.

NIP 2 must establish long-term performance requirements for the UK’s infrastructure with a view to demonstrating how the short-term pipeline will contribute to meeting these goals.

Fulfilling commitments

The government also needs to make these commitments credible - memories of the 10-year transport plan are still fresh in the minds of many infrastructure professionals.

It may need to be creative, putting in place a mix of “hard” policy such as fast-track planning approval for major projects, and “soft” measures

such as high-profile public reporting, with stakeholders encouraged to scrutinise progress against NIP goals.

Finally, the government should, with the support of bodies such as ICE, sell the benefits of infrastructure investment and build up a broad consensus around its goals and priorities.

As the party conference season approaches we will do just that, engaging with stakeholders and politicians across the political spectrum.

 

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