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Project finance: The year to deliver infrastructure

Halfway through its term of office, the coalition has suffered two and a half years of stagnant growth and double dip recession. So 2013 is the year that downbeat news must be replaced by signs of growth. And after years of government focus on infrastructure to generate growth, this has big implications for our sector, says Nelson Ogunshakin


History lessons: Major infrastructure projects, such as High Speed 1, drive growth

The government has set out a National Infrastructure Plan as a key means to driving growth. So far much of this remains a pipeline of projects that will be pushed through in the future. But increasingly government knows it must deliver more of it on the ground to get the economy going again.

To this end it has announced £40bn of guarantees to get major projects underway. Of this, £10bn has now been allocated, and although the exact details of howthese guarantees work remain a little unclear, it will be important to monitor delivery of these projects over the coming twelve months.

The creation of a National Infrastructure Plan Strategic Engagement Forum (NIPSEF) will hopefully play a prominent role in doing that. It has been given a mandate to help overcome obstacles to the delivery of the National Infrastructure Plan, but it will also serve as a body to monitor the government’s delivery of the plan.

To that end NIPSEF has already staged its first round of meetings. The launch took place in late October with around 50 stakeholders meeting with chief secretary to the Treasury Danny Alexander to set out key priorities.

Since then we have had the first meetings of the sub-groups focused on each of the main sections of the infrastructure industry, such as finance or asset owners and managers. These meetings will help to inform the first thematic meeting with Alexander in late January. This is why it is crucial that this body brings together all of the different parts of the infrastructure industry.

Financiers, the managers of assets and the engineers and contractors who design and deliver infrastructure may all see a problem differently. It is only by bringing this whole infrastructure industry together, including representatives of the business users of infrastructure, that holistic solutions can be generated and implemented.

The government has also led into 2013 with another major public policy agenda focusing attention on our industry. The PFI review ran nine months late. Like the Electricity Market Reform, delays in new models and rules undermine certainty and result in a loss of investor confidence across the sector.

The government has too often been too slow in delivering policy reform in this way. But now that reforms have been announced, we hope to see no more such delays from government.

And while the PFI review ran late, it did report some good news for the industry. PF2, as the new model has been branded, will see money allocated for the building of schools and roads almost immediately. Better still, some of the changes aim to address long-standing problems with PFI.

PFI use has fallen across government since 2010. This reflected a loss of political and public confidence in a mechanism that lacked transparency and that saw significant divergence between the best and worst performing departments and projects. It also reflected the loss of money available from the public sector to fund returns on new schemes.

The new model aims to address this. Creating centralised units for procurement will help ensure good expertise from the procuring department. There will also be a fixed timetable to halt the tendency towards complexity that in the past saw deadlines slide and grow ever longer.

The removal of softer services, such as cleaning and catering, should also bring down costs of PFI and see greater transparency as fewer factors are included in a headline figure.

So 2013 will thus see a strong focus not on new measures yet to be announced, but on making the measures now announced work.

Be it the guarantees, NIPSEF or PF2, the government has set up 2013 to be a year of delivery. We must, as an industry, support that agenda and hold the government to it.

  • Nelson Ogunshakin is chief executive of the Association of Consultancy and Engineering

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