UK government aims to boost infrastructure

By Sandy Guthrie29 November 2011

Increased infrastructure spending worth £5 billion (€5.9 billion) has been announced by the UK's Chancellor of the Exchequer in his autumn statement, in a move he said "would overhaul the physical infrastructure of our nation".

The plans include £1 billion (€1.17 billion) for the rail network, and he has given the go-ahead to 35 road and rail projects across England.

Part of Chancellor George Osbourne's aim is to move away from the private finance initiative (PFI) method of funding and, instead, try to persuade pension funds to invest £20 billion (€23.4 billion).

However, Labour's Margaret Hodge, chairman of the Public Accounts Select Committee, told the House of Commons that the infrastructure plan sounded like PFI by any other name.

Welcoming the Chancellor's announcement, the Construction Products Association's chief executive, Michael Ankers, said, "Improving the quality of our infrastructure has a key part to play in raising business competitiveness and stimulating economic growth, and it is encouraging that the government has recognised this.

"At a time when construction output is falling and forecast to continue to do so for the next couple of years, the additional investment on infrastructure will help create new jobs and generate as much as £75 billion (€87.8 billion) of economic activity across the economy as a whole."

He went on, "Today's announcements, however, do little to reverse the sharp fall in government capital spending - from £62 billion (€72.7 billion) in 2010/11 to £45 billion (€52.7 billion) in 2013/14.

"The most important step for the long term is to underpin investment on infrastructure with private finance, and so the announcement that an additional £20 billion of funding from pension funds and capital markets is particularly welcome. Funding of this kind will help create a long-term sustainable framework for investment in our infrastructure which is set apart from the vagaries of government spending cycles."

Just before the Chancellor's statement, the independent OBR (Office for Budget Responsibility) painted a gloomy picture for the UK economy. It said the economy had grown much less strongly than predicted earlier this year.

'More immediate measures needed'

Simon Rubinsohn, RICS (Royal Institution of Chartered Surveyors) chief economist, said, "Today's figures from the OBR are predictably disappointing and serve to emphasise how desperately the government needs a positive strategy that delivers sustainable growth quickly to the UK economy.

"The recognition that infrastructure development and the construction industry are the key drivers of this much needed growth is a good start but will only deliver in the medium term. More immediate measures are needed to kick start the economy now."

At the Confederation of British Industry (CBI), director general John Cridland said, "Investing in our infrastructure will act as a stimulus to growth. The projects announced will not just boost immediate activity and jobs, but a longer-term infrastructure plan will support our construction sector in the years to come.

"We've called for new forms of investment to attract up to £200 billion (€234.3 billion) into the UK's infrastructure in the next five years. Making it easier for pension funds to invest in UK infrastructure is a great idea, but we need to get the detail right."

Among the infrastructure projects that were mentioned by the Chancellor were the expansion the Mersey Gateway project in north west England, a new Lower Thames crossing, and a new rail link between Oxford and Bedford to the north west of London.

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