Faced with fast-growing competitors overseas and a healthy debate at home about how projects are paid for, UK infrastructure is having a “burning platform” moment. The choice is stark – it must become more efficient or risk losing the global race.
The government’s National Infrastructure Plan (NIP) unveiled last month is an important milestone on the country’s dash to catch up.
It recognises and champions infrastructure’s power to drive long-term economic growth in Britain, and comes after three years of public sector austerity have trimmed the national deficit.
Inward and private sector investment
Attracting foreign investment into UK infrastructure is a key part of the Plan, which sets out the government’s investment priorities until 2030, and details 40 priority schemes’ in the energy, transport, flood defence, water and communications sectors.
British infrastructure has proved a popular destination for sovereign wealth funds and overseas institutional investors, who between them have pumped in £15bn since 2010.
Most of this inward investment has been into existing infrastructure assets – which are seen as less risky than new projects – so October’s announcement that Chinese investors are to fund the construction of Britain’s first new nuclear power station in a generation was an important change.
Despite three straight quarters of GDP growth in 2013, Britain’s public sector finances remain constrained, and the government is relying on the private sector to fund much of the infrastructure programme.
The news that six major insurance companies will together invest £25bn in UK infrastructure over the next five years is a welcome boost, but it is still unclear how much of that money will go towards delivering the NIP, and what proportion will be committed to new-build infrastructure.
Offer the funding models and the right environment and they will come
In order to keep the capital flowing, it is essential that the government creates not just appealing funding models but also the long-term stability that investors crave.
Politicians should resist the temptation to use strategic programmes as political footballs, and everyone involved in the infrastructure process – from the government to investors, from industry to academic institutions and down through the supply chain – must create a new industry model which is highly integrated and collaborative.
The NIP has introduced several initiatives to speed up the highest priority projects, including the creation in Whitehall of a Major Infrastructure Tracking Unit - which will track the progress of the Priority Schemes.
But I’d like to see it go further – and set up a dedicated infrastructure board made up of government and industry leaders to oversee all transactions and planning. I would also like to see the industry create a stronger voice and a stronger brand for itself. One that is truly valued as an economic force, as an industry to invest in, and as an industry that is attractive to career-minded young people.
We as an industry must also embrace both technology and visionary thinking, and change the relationship between client and contractor – rewarding according to value, not just baseline cost.
Finally there is the issue of attitude. British infrastructure achieved great things for the Olympics when the eyes of the world were on it. If the “can do” spirit that inspired the nation then can be maintained, it will be arguably the Games’ greatest legacy.
With foreign money flowing into British infrastructure projects and British funds set to follow, the industry must seize this rare opportunity to reshape itself. Failure to change could become a failure to compete. The platform may be burning, but the industry has the chance of a lifetime. It should use it well.
Murray Rowden is infrastructure managing director at Turner & Townsend