Faster decisions on infrastructure needed to halt decline in condition and capacity

John Horgan
06 November 2014

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The big challenge ahead will be for energy and road reform to translate more speedily into better, fully operational infrastructure on the ground, says John Horgan.

Of all the findings in the CBI-URS Infrastructure Survey, published this week, two areas are of critical concern for UK business: energy and roads. This is hardly surprising given their impact on the bottom line, whether due to the cost and security of energy supply or our reliance on the road network to transport people and goods.  

"If our infrastructure cannot cope with the increasing demand, it will become an ever growing deterrent to inward investment."

Alarmingly, almost two-thirds of companies perceive energy infrastructure as getting worse and 67% expect it to further decline in the next five years. In roads, over half report deterioration in the UK’s motorways and 77% believe they will get worse in the next five years. Perceptions of local roads are bleaker still, with 65% reporting deterioration in the past five years and 86% expecting this decline to continue.

UK business paints a sombre picture but how close are these perceptions to reality? After all, there has been some recent progress with initiatives such as the UK Guarantee Scheme helping to bolster much-needed investment for projects such as Hinkley Point C and the Mersey Gateway.

With the potential for real transformation afoot, such as through the implementation of Electricity Market Reform (EMR) and the Highways Agency’s transition to a government-owned company, arguably many of the right tools are in place to facilitate infrastructure investment and delivery.

Both steps are welcomed by business, with 95% believing EMR will improve investment in energy and over two-thirds confident that Highways Agency reform will have a positive impact on the road network. The Highways Agency reform – along with a five-year Road Investment Strategy (RIS) – will, for example, help reduce some of the shorter-term uncertainty that plagues the sector and its supply chain by giving a clearer picture of road improvement plans for the years ahead.

However, the biggest challenge will be for energy and road reform to actually translate more speedily into better, fully operational infrastructure on the ground.

While the reforms are steps in the right direction, the long timeframes required to deliver major infrastructure projects can often delay the tangible improvements that increase business confidence. Road schemes are regularly held back by further feasibility and value-for-money assessments.

Greater collaboration between central government and local authorities would help mobilise political support and leverage private sector investment while satisfying both national and regional needs. More regional autonomy, as announced this week by the Chancellor in Greater Manchester, is therefore welcome news.

"The long timeframes required to deliver major infrastructure projects can often delay the tangible improvements that increase business confidence."

The survey provides clear evidence of the strong appetite for a new approach to infrastructure planning and delivery. Critically, as many as 89% support the creation of an independent infrastructure commission, similar to proposals recommended by Sir John Armitt. The ability to plan beyond the five-year electoral cycle would give industry much greater confidence that demand and support for new infrastructure would be sustained.

While long-term planning will help meet future infrastructure needs, it won’t address the short-term challenges. With the UK’s electricity capacity margins set to fall to as low as 2% next year, there is a very real case for finding some quick wins in demand side reduction.

Improving energy efficiency in the home and across industry would help and have a significant impact on the UK’s overall energy consumption, but this is unlikely to happen quickly enough and to the extent needed. While creating a framework for long-term planning remains a necessity, decisive action is urgently required to increase confidence – and outcomes – in the short term.   

No government’s resources are infinite but progress in modernising and upgrading UK infrastructure is much slower than needed. Lower than expected tax revenues and the continuing imperative to reduce the deficit hamper government expenditure. Although our economy is improving, growth is by no means consistent across the regions or even by sector.

If our infrastructure cannot cope with the increasing demand, it will become an ever growing deterrent to inward investment. Unless HM Treasury, infrastructure providers, private financiers and industry can agree the priorities for spending the country’s limited funds, this vicious circle will never be broken.

John Horgan, Managing Director, Europe, Middle East, Africa and India, URS