Ministers face criticism as projects shun pump priming private finance guarantees.
Concerns were raised this week about the government’s continued failure to provide policies to kick start the huge number of “shovel ready” local schemes that are vital to the UK’s competitiveness.
Treasury ministers have vaunted the launch of the £40bn UK Guarantees scheme under which the government will underwrite private finance for so called “nationally significant” projects.
But engineers fear that it will have little impact on local investment decisions and so not deliver much needed short term work.
Arup project director Duncan Wilkinson - who sits on the Association for Consultancy & Engineering’s infrastructure round table - criticised the scheme’s focus on major infrastructure projects which, he said, overlooked smaller projects that would provide more economic benefit.
“Local projects do not have the same kudos as a shiny new rail or tram system,” he said, adding that this meant investors often overlooked many vital projects.
He added that unlocking funds to tackle the massive highway maintenance backlog would provide the kind of shovel ready work that would give an immediate boost to the economy.
Engineers have already hit out at the UK Guarantees scheme’s criteria for qualifying projects. They have so far allowed only projects that already have funding to benefit (NCE 6 September).
Wilkinson agreed that the UK Guarantees scheme would struggle to help projects - regardless of size -that hadn’t already secured some financial backing.
“I have yet to hear of a project that is stalled because finance is unavailable”
Senior finance source
“Developers would not put a project through planning unless they had funding.” he said. “[UK Guarantees] will have no impact on jobs and the economy in the short term.”
Doubts about the scheme have reemerged as it was revealed that the £600M Mersey Gateway project did not need the support of the UK Guarantees scheme to progress. This was despite the fact that Treasury secretary Danny Alexander named the crossing as a likely beneficiary.
“At the moment we do not need the guarantee to go ahead [with the project],” said Mersey Gateway project director Steve Nicholson.
The project was highlighted after the government announced its plan in July to underwrite £40bn of nationally significant infrastructure schemes that were ready to start construction within 12 months (NCE 26 July)
A Treasury spokesperson defended the scheme and said: “We are keen to provide the first guarantees as soon as possible and discussions are on-going with dozens of interested parties.”
But news that the Mersey Gateway project did not need funding guarantees underlined finance experts’ views that the scheme was still failing to unlock projects that were struggling for finance.
“I have yet to hear of a project that has stalled because finance is not available,” said one senior finance source.
“The whole scheme feels unstructured and unsophisticated.
“The whole purpose of private finance is to introduce real rigour into the process,” he added. “This is a step backwards from the Private Finance Initiative.”
Further uncertainty about the use and effectiveness of the scheme on other major UK infrastructure projects also emerged this week.
Thames Water head of London Tideway Tunnels Phil Stride told NCE that his project was in discussion with Infrastructure UK about the use of loan repayment guarantees.
But he said that no decisions about how the £4bn project will be structured or funded were expected to be reached until the end of next year. And given that the main construction phase is not expected to start until 2016 at the earliest, Stride’s view was that the government scheme would not provide an immediate boost.
Meanwhile energy firm EDF said it was unsure whether it would seek guarantees for loans to fund construction of the £10bn Hinkley Point C new nuclear power station.
NCE understands there are plans to use the scheme to help secure finance for the £1bn rolling stock required for Crossrail - a non-infrastructure element of the huge trans-London rail project.
New coordination body
Treasury secretary Danny Alexander this week created a new National Infrastructure Plan Strategic Engagement Forum (NIPSEF) to coordinate government and industry efforts to boost infrastructure spending.
Alexander will initially co-chair NIPSEF with Association for Consultancy & Engineering (ACE) chief executive Nelson Ogunshakin.
The forum’s launch on 29 October brings government officials together with key personnel from the infrastructure delivery supply chain, asset owners, and regulators.
The chair will rotate between the Infrastructure Alliance members: ICE, ACE, Construction Products Association and Civil Engineering Contractors Association.