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Britain lags behind on construction investment

Buildings and infrastructure in the UK are generating lower returns as a proportion of GDP than they are in most other developed economies, a report has warned.

Consultant Arcadis has valued the share of the UK’s national profits from buildings and infrastructure at £412bn in 2013. This was equivalent to 29% of GDP, significantly below the 35% average of advanced economies.

On this measure of built environment performance, the UK ranks 26th out of 30 countries studied. Its closest neighbour, France, derived a greater share of national profits from its built asset investment than the UK despite having a lower GDP.

The report says that proposed mega-schemes High Speed 2, the Thames Tideway Tunnel and investment in energy infrastructure are critical to the UK’s economy.

Arcadis head of strategic research and insight Simon Rawlinson said: “The relatively low value of the UK’s overall built asset stock points to the need for greater investment in built assets in specific areas of the economy.”

He added: “The UK risks a future of enduring problems due to the quality of its ageing infrastructure, which could result in weakened economic growth.”

The Global Built Asset Performance Index was developed with the Centre for Economics & Business Research.

It shows that the total national profits from the built assets of 30 of the world’s biggest economies was £16.1 trillion, or 40% of combined GDP.

China led the way with profits from built asset investment last year of a whopping £4.1 trillion.

The United States came second, with £3.3 trillion, and India was third with £1.2 trillion.

But Mexico and Turkey had the best built asset performance, both deriving 61% of their GDP from investment in buildings and infrastructure. This compared with just 14% in Russia.

The report says that Mexico and Turkey’s low labour costs and large industrial sectors, maximised their built asset values.

“Furthermore, these countries are newly industrialised, and as such built assets could be expected to deliver high gains in productivity as their economies continue to develop,” it says.

“With a young, growing workforce in both countries, these dynamics should combine to spur on further built asset investment as the rewards for such undertakings are more likely to find their way into boosting business profitability, creating an even greater incentive to invest.”

Rawlinson said different countries faced different challenges to maximise the performance of their built assets.

“While some countries are proactively managing their built asset wealth to put them in pole position to reap the economic returns over the coming decade, others are in danger of failing to invest in their ageing built asset base, leading to a slow decline in their economic power,” he said.

“Sustaining a built asset base that protects the environment, enables people to thrive and creates economic value is possible but a clear long-term vision to deliver this infrastructure is absolutely essential.”

The value of built assets in the Middle East, China and Asia is expected to increase the most in the next eight years.

Arcadis predicts that the value of China’s built assets will increase by 77% to 2022, while those in Saudi Arabia are expected to rise in value by 70%. In Indonesia, the value of these assets is expected to rise by 66% .

 

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