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Debate: expert panel discusses HS2 and the 2014 Budget

Following the launch of Sir David Higgins’ HS2 Plus report and the chancellor George Osborne’s Budget statement, Aecom brought together a panel of experts to debate their implications.

The panellists discussed housing and infrastructure, and the importance of having a joined-up strategy to attract investment and deliver vital schemes across the country; from building new housing developments at either end of the proposed Crossrail 2 route, to ensuring HS2 will improve connectivity and and boost regeneration in towns and cities north of Birmingham.

Panellists

Mark Castle, deputy chief operating officer, Mace Construction

Rebecca Evans (chair), editor, Construction News

Paul Farey, head of fiscal incentives, Aecom

David Leam, head of infrastructure, London First

Stephen Tarr, major projects managing director, Balfour Beatty

Dr Graham Winch, professor of construction project management, Manchester Business School

 

The Budget offered little in terms of new infrastructure announcements, but the panellists welcomed the government’s commitment to building a new garden city in Ebbsfleet, and to previously announced schemes such as the Mersey Gateway Bridge.

However, they were concerned that there was nothing in the Budget to stimulate the green agenda, or to mobilise private sector funds for infrastructure investment.

Aecom’s head of fiscal incentives Paul Farey said the move to extend and raise the annual investment allowance for plant and machinery to £500,000 until the end of December 2015 would improve the cashflow of businesses that build and refurbish non-residential properties.

“The government has committed to put out a prospectus on garden cities by Easter, but there’s still enormous amount of caution attached to that – they’re clearly terrified about the idea of largescale development”

David Leam, London First

But London First’s head of infrastructure David Leam expressed concern that there would be a “big, looming set of choices, cuts, and priorities yet to be agreed upon” if unprotected government departments are to meet their efficiency targets.

Housing

The panellists agreed that the UK needs to step up its game and build more homes to meet demand and help more people get on the housing ladder.

To help overcome the challenges around increasing the country’s housing stock, Mr Farey said he would have liked Mr Osborne to introduce incentives to encourage the conversion of commercial properties to residential, by cutting the VAT rate to zero, for example.

Mace Construction’s deputy chief operating officer Mark Castle said contractors were responding to the need to build more homes by raising private investment and putting in their own capital to kick start residential projects.

 

He questioned the resilience of the prime upper end market which he said was “very much fuelled by foreign investment” in London, and said he would like UK contractors to get involved in more urban regeneration projects, similar to Mace’s residential-led Greenwich Square scheme, that deliver affordable homes for UK buyers.

“What’s interesting about what Sir David Higgins has done is what he’s not said – so he said let’s get to Crewe… But the question is, how committed is he on that model to taking it to Leeds and Manchester?”

Dr Graham Winch, Manchest Business School

Mr Leam said he was encouraged by the government’s commitment to Ebbsfleet, but described the £200m, 15,000-home scheme as a “no-brainer” and said he was disappointed that it was treated as a ‘unique’ opportunity.

“How on earth can we meet housing targets if we don’t do more of this?,” he said.

“The government has committed to put out a prospectus on garden cities by Easter, but there’s still enormous amount of caution attached to that – they’re clearly terrified about the idea of largescale development.”

High Speed 2

Manchester Business School’s professor of construction project management Graham Winch praised HS2 chairman Sir David Higgins’ achievement in shifting the arguments for the project to focus on connectivity and regeneration north of Birmingham.

“What’s interesting about what Sir David Higgins has done is what he’s not said – so he said let’s get to Crewe… But the question is, how committed is he on that model to taking it to Leeds and Manchester? Are we talking about a short period or a long period?”

On Sir David’s recommendation to scrap the link between HS1 and HS2, Dr Winch said it could reinforce the argument that HS2 is a feeder into London “because you take out the opportunity to get from London to Paris and Brussels in a speedy way”.

“What we’re lacking is a clear blueprint saying these are our objectives and this is what we need to do”

Stephen Tarr, Balfour Beatty

Infrastructure

Balfour Beatty major projects managing director Stephen Tarr said there would be a need to ensure HS2 does not consume funding, and called for a coherent plan to attract more private investment for infrastructure.

He described the National Infrastructure Plan as “a list of projects rather than a coherent plan with priorities” and said it lacked detail on where the money would be found for projects.

“What we’re lacking is a clear blueprint saying these are our objectives and this is what we need to do.”

Mr Leam agreed that the NIP was “a symbol of ambition and a greater recognition of the importance of infrastructure as a stable investment, as opposed to a planning tool or a pipeline”.

Without a clear plan, Mr Tarr said he was concerned about the UK’s ability to attract sovereign wealth funds to invest in UK infrastructure and feared it would undermine business confidence.

Mr Farey cautioned that pension funds could see their ability to invest annuities money restricted as a result of the pension changes introduced by the chancellor in the Budget.

Political leadership

Asked by a member of the audience how the political process could be sped up to improve the delivery of planned infrastructure projects, Mr Tarr said major projects could not be short-circuited, but admitted there was “a distinction between letting democracy take its course and political expediency”.

“The industry significantly needs to up its image in terms of trying to persuade young people to join the industry”

Mark Castle, Mace

Dr Winch said compared with other countries, the UK was notable for its lack of an infrastructure agency within the government.

“What has started to happen within the cabinet office – is we’re seeing the early signs of some sort of serious infrastructure agency… I think a lot of what we can do is argue for the reinforcement, our approach should be to encourage them to do more.”

Mr Leam said it would be essential for the political leadership to get behind major projects and ensure their delivery.

“The planning system is tiresome, time-consuming, and expensive, but the Thames Tideway Tunnel isn’t going to not happen because of the planning system. These big projects need the political leadership to say, ‘yes we’re going to do this’.”

A member of the audience commented that the government paralyses itself by focusing on the minutiae of cost-benefit analyses, but that it was impossible to put a price on the “just do it” factor.

What should the government and industry do before the next election?

Mark Castle

“The industry significantly needs to up its image in terms of trying to persuade young people to join the industry.

“The government has committed £85m to support apprenticeship grants going forward, and we need to engage with young people between the ages of 11 and 18 to attract them.”

Stephen Tarr

“The overriding issue is about having a clear plan of [infrastructure] priorities. That will allow the industry to plan investments to make sure they’re fit to deliver work.”

Dr Graham Winch

“We need to open a debate about what is government’s role and what its capabilities should be. We need people within government who actually understand infrastructure and understand the choices that need to be made.”

David Leam

“My wish would be for a decision on airport expansion after the election.”

Paul Farey

“From government what I’d like to see is a tax system that supports private investment. The private sector has a very significant role to play directly or indirectly through investment.”

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