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Infrastructure funding drive intensifies

The construction industry is leading a two-pronged attack on government, seeking to unlock funding for small infrastructure schemes and establish the sector as the basis for economic recovery.

Contractors are helping infrastructure trade bodies lobby ministers to boost innovative financing methods and reduce obstacles to growth.

The concerted campaign comes as infrastructure funding climbs the political agenda, featuring heavily in party conference speeches as a means of reviving the faltering economy.

Chief secretary to the Treasury Danny Alexander last week announced a £500 million Growing Places Fund, which ministers hope will unlock private sector investment.

But several sources told CN they had serious concerns over government expectations that £140 billion of its £200bn planned infrastructure pipeline will come from private funding, despite the recent acknowledgement of the sector’s role.

One source told CN: “It is not really clear what conditions are in place for government to say it intends to find that 70 per cent investment from the private sector.

“New-build in particular seems to be a problem because of the associated risks around construction and there has to be a model that allows government to manage risk effectively. It may be that the public sector has to take on a greater role in that.”

In its submission to the government ahead of the National Infrastructure Plan 2, the Institution of Civil Engineers said it was necessary to improve the credibility of infrastructure commitments and build strong relationships with overseas private investors to help fund UK projects against strong competition from overseas.

Vinci chairman and chief executive John Stanion, recently appointed to the CBI’s infrastructure board, said he would like to see a 10-year work pipeline visibility published by government, but that Vinci is advocating innovative financing methods.

He said his perception of the Growing Places Fund, the criteria for which have not yet been published, was that it is aimed at small-scale bottlenecks to social infrastructure development and was unlikely to interest Vinci unless it unlocks new commercial developments.

Mr Stanion said: “We are placing emphasis on helping to develop new sources of finance like asset-based leverage and Tax Increment Financing to enable projects to move forward - Watford Health Campus is an example. We are also involved in developing ideas for stimulating investments in the road network.”

The company is engaging with trade bodies and IUK to lobby for infrastructure investment as “the best way to stimulate growth and employment” while contributing to making the UK an attractive place for inward investment, he said. “It is the key to turning around our economy in the short term.”

Trade bodies and contractors are also working together on submissions to the government ahead of the publication of the National Infrastructure Plan 2 and Plan for Growth.

ICE head of policy Andrew Crudgington said: “The reliance of the highways network on public funding, which is likely to be tightly constrained for the foreseeable future, is a cause for concern.

“Funding models like TIF that allow public and private investors to benefit from the increase in economic activity created by transport links ought to be a priority.”

Industry trade bodies are working together to provide guidance to the government on the types of schemes that can be progressed most quickly with immediate funding through schemes like the Growing Places Fund.

But there was also a view that the fund, which will enable projects to get off the ground by financing a key element of infrastructure such as an access road or a bridge, is a sign of things to come from government.

James Stewart, former chief executive of Infrastructure UK and now chairman of global infrastructure at KPMG, told CN: “The whole point of the last infrastructure plan was government acting as an enabler and the Growing Places Fund is an example of the government acting as an enabler.

“Government funding is acting as a catalyst for wider private sector investment. This is £500m that is going to be put out there relatively quickly and turned into construction work fairly quickly.

“It is absolutely designed to be a stimulus in the short term.”

He suggested councils should become more financially self-sufficient, for example through TIF or congestion charging.

“Cities are all in competition with each other and if they want to grow they will have to take things into their own hands a little more,” he added.

Grant Thornton government infrastructure and advisory partner Phil Woolley encouraged developers and contractors to “step up and help deliver bids” with Local Enterprise Partnerships to secure the funding for schemes which need a kick start.

He said the most important factor will be the creation of a framework that can capture the various funding mechanisms - whether TIF, the community infrastructure levy or New Homes Bonus.

 

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