News

Borrow cash to save money on road maintenance authorities urged

Highways authorities are being encouraged to borrow cash at a time when interest rates are historically low to invest in road maintenance to save money in the long term.

The Highways Term Maintenance Association has produced evidence that demonstrates that an investment of £30M, as one example, can save over £70M over 34 years even including the cost of borrowing.

“We are keen to promote a move away from short term reactive highway maintenance to a proactive long term approach based on asset management principles."

In its report “Spend to save’ the HTMA  said there was “compelling argument” that early investment to arrest the decline in condition of roads delivered a cost benefit ratio in excess of 2:1.

Local road maintenance has to fight for its allocation with other local authority departments at a time when council budgets have been cut 30% with more to come. Government announced an increase in capital spending on local roads of £250M a year to 2021 and although welcomed by industry the expectation was that authorities would have to dress revenue maintenance up as capital works in order to carry out routine work. 

Backlog of investment in local road maintenance has been estimated at £12bn.

HTMA said: “We are keen to promote a move away from short term reactive highway maintenance to a proactive long term approach based on asset management principles.

“To achieve this proactive approach, we believe what is needed is some early up front capital investment thereby minimising the on-going and inefficient revenue demand.”

HTMA highlighted three authorities which have adopted the option of borrowing to invest in road maintenance.

Hereford, which has a road network valued at £2.5bn, borrowed £20M plus £9.4M interest to repair its roads which has generated estimated maintenance savings of £74.4M, delivering a net benefit of £45M over 34 years.

Blackpool, which has a road network valued at £500M, borrowed £30M plus £18.4M interest) and produced an estimated £100M in maintenance savings, a net benefit of £51.6M over 25 years. Every week without the investment would effectively be costing the authority nearly £40,000, HTMA pointed out.

Oldham, which has a road network valued at £1.3bn, borrowed £10M plus £5.2M interest and delivered estimated savings of £31.2M, a net benefit of £16M over 25 years. Every week without the investment would effectively be costing the authority over £12,000, HTMA said.

Read the report here