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Chancellor needs to look beyond Chinese cash for UK infrastructure, warns RICS

Tender prices are expected to rise 30% in five years and investment is not all there for existing £400bn of infrastructure in the pipeline, the Royal Institution of Chartered Surveyors has warned. 

Jeremy Blackburn, RICS Head of Policy said: “Put simply, in order to maintain our position on the world economic stage, Britain needs a first-class infrastructure system. By this I mean the obvious trains, planes and automobiles that come with investment in our transport systems, but equally our broadband and energy infrastructure must remain fit for purpose.

“While the Hinkley Points of this world have the profile to attract international investment, many potential investors simply do not get to hear about smaller projects. By introducing a central register, the Chancellor could easily unlock one potential barrier"  - Jeremy Blackburn, RICS

“Since the election, the Chancellor has quite rightly made infrastructure a strategic priority, set up an independent commission and will revamp the national infrastructure pipeline and plan. We welcome the work that he has undertaken this year, which will ensure the right structures are in place to deliver our major infrastructure works.

“But there is a much bigger problem which, unless addressed by the Chancellor this Wednesday, will have major repercussions for the UK’s current and future infrastructure plans.   

“Our data suggests that tender prices for infrastructure projects are expected to rise by around 30% over the next five years. In addition, we don’t have the investment needed to cover the existing £400bn infrastructure funding gap. British infrastructure is undoubtedly facing a funding crisis. While money allocated so far from Treasury and local government pension pots will help, we need to go much further.

“Of course, it is clear that we need to attract greater levels of foreign investment, but the Chancellor is short-sighted if he believes that Chinese cash alone will address our investment needs. 

“While the Hinkley Points of this world have the profile to attract international investment, many potential investors simply do not get to hear about smaller projects. By introducing a central register, the Chancellor could easily unlock one potential barrier.

"Government must urgently review these and other barriers to private sector investment in infrastructure, so that we can close the investment black hole. RICS would recommend that this Review would report to Ministers and Lord Adonis, modelled on the Montague Review of real estate investment trusts (REITs), which ultimately broke down many of the barriers blocking investment in this sector.

“The skills shortage around infrastructure is now at the highest levels seen in the past 20 years. During the recession an estimated 400,000 people left construction – one of the highest rates of redundancy across any sector, but worse is yet to come as we are expecting a ‘knowledge cliff’ when those left in the workforce eventually retire.

“These twin factors have incubated a long term skills shortage, which many of our members have cited as the biggest risk to their businesses. Our survey found that, around two in five (43%) surveying firms are currently turn down new business opportunities due to a dearth of skilled workers, with each of them passing up an average of five contracts per year. By 2019 this is set to rise to 54%, meaning the surveying sector’s 10,000 businesses could be turning down some 27,000 projects between them each year if current trends continue.

“What we need is a construction skills investment charter led by Ministers, to incentivise employers and colleges who employ and train construction workers; including incentives such as reduced National Insurance contributions and tax relief for local investment in construction colleges, academies and school programmes. With the devolution of the skills agenda, local government should co-invest with industry in construction-focused technical colleges and school career programmes to encourage a diverse entry to the industry.

“This Wednesday, the Chancellor needs to fight a war on both fronts, in order to deliver the investment and skills that will give Britain the first-class infrastructure it so rightly deserves.”

If you would like to contact Jackie Whitelaw about this, or any other story, please email jackie.whitelaw@infrastructure-intelligence.com.