Building a stronger infrastructure sector

02 March 2016

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UK infrastructure continues to be a ‘hot sector’ and a magnet for international investment says KPMG’s Sue Kershaw.

There is a misconception that infrastructure suffers adversely given the loose definition it often retains. However, it is the breadth and depth of the sector, which often makes it hard to define, that makes it so attractive to investors.

For me, infrastructure in its widest sense is all the fabric required to support society. The London Infrastructure Plan offers a helpful suggestion of its remit: transport, digital connectivity, energy supply, housing, water and waste. Meanwhile, the National Infrastructure Plan suggests a more traditional description with infrastructure comprising: energy, transport, waste, flood defence, communications, water and science.

While we can debate definitions, we can all agree that UK infrastructure continues to be a ‘hot sector’ and magnet for international capital hunting yield. Driven, in part, by Britain’s ability to deliver large scale projects. The nation currently has a £422bn pipeline of products slated for 2016 and beyond. Nearly two thirds (64 per cent) of which is privately funded, a quarter is publically funded, while the remainder is sourced from mixture of both.

Although this compares to a healthcare investment pipeline of 520 projects worth £995.39m in 2014/15. To a large part, this included the redevelopment and refurbishment of hospitals across UK. And for real estate, with major housing projects ranging from £15m to £600m, the sector accounted for 11 per cent of GDP at the end of 2014. Investment in the UK real estate market was €65bn that year.  For reference, the value of UK commercial property is estimated at £647bn in 2013, while residential property reached £5.75trn in 2014, according to Savills.

The magnitude of infrastructure projects within the gift of the UK government in 2014 offers an insight into how capital is distributed. The vast majority of projects (96 per cent) in the pipeline was earmarked for transport (£66.5 billion), energy (£22.3 billion), education (£13.0 billion), Ministry of Defence (MoD) (£7.9 billion), housing and regeneration (£4.9 billion), health (£4.3 billion) and flood (£4.0 billion). The remaining four per cent of the pipeline value covered Police Forces (£1.3 billion) and intellectual capital (£1.4 billion), waste, justice, further education, the Coal Authority and Home Office, which were under £1 billion each.

This is certainly a positive for the UK. Infrastructure projects employ large numbers of people across all regions and industry segments. They also contribute to the growth of other sectors indirectly or directly, such as transport projects generate more connectivity and mobility of labour.

But is also puts into sharp focus our urgent need to upskill. And quickly.

The most important challenge will be in broadening the pool of talent that currently feeds infrastructure in the UK and attract more women, ethnic minorities and those with disabilities. The old image of hard hats, boots and mud has damaged its perception among young graduates.

We need to help educate these young people, who have so much to offer, that there are so many entry points to infrastructure. Project management, for instance, does well in attracting those from academic backgrounds, such as economics and history, who want to be challenged and help solve complex issues.

In an economy dominated by service industries, we should also work hard to demonstrate the tangible rewards that working in infrastructure-related industries can offer. Almost everyone in our industry must get some sense of pride when they pass a project that they have worked on, whether it is the power plant you pass on your way to work or a bridge you cross on your way to see relatives! 

It is as easy as going into your kids’ school to talk about what you do or helping a friend out with work experience for their child. If we all do our bit, we can help make infrastructure a more accessible, diverse and skilled industry, for which the whole country would benefit.

Sue Kershaw is UK head of infrastructure programme and project management at KPMG.