Opinion

The case of the disappearing pipeline

Richard Threlfall KPMG

This week KPMG published analysis of the latest Government Construction Pipeline (GCP). Richard Threlfall explains why more work needs to be done to boost the completeness, accuracy and consistency of the pipeline's data.

The Government Construction Pipeline (GCP) has been compiled by the Government twice each year since November 2011, in response to requests from the construction industry for better visibility of Government’s construction demand. 

Whilst there is some overlap in projects between the Construction Pipeline and the National Infrastructure Plan pipeline, they are quite distinct.

"Our latest analysis highlights a 28% drop in the number of projects in the pipeline, from 3,148 in December 2014 to 2,262 in August 2015. The total value in the pipeline has also fallen, from nearly £128bn to just under £119bn in the same period."

The Government Construction Pipeline seeks to capture planned public spending on all types of construction, of buildings as well as infrastructure, including capital spend on enhancements of existing assets. It only reflects the public element of the committed funding to these projects and does not include any private contribution. As a result there are, for example, few energy and water projects included. Transport accounts for just over 50% of the pipeline by value.

I welcome the Government’s initiative in compiling the GCP, but unfortunately each of our reviews has confirmed that it leaves much to be desired in completeness, accuracy and consistency. Our latest analysis highlights a 28% drop in the number of projects in the pipeline, from 3,148 in December 2014 to 2,262 in August 2015. The total value in the pipeline has also fallen, from nearly £128bn to just under £119bn in the same period.

A stable pipeline would give the construction industry good visibility of future demand and the ability to plan and invest for that demand. It would lead to efficiencies for the Government and hence for the taxpayer. Instead we have a pipeline whose data is so incomplete, and which fluctuates so wildly and erratically that the industry can place no detailed reliance on it.

The latest KPMG analysis of the UK construction pipeline can be read here

It appears that the drop in volume of projects is due to some Government departments putting projects on hold in the expectation that they get culled in the Spending Review. The vast majority of the projects which have evaporated are in the Defence, Justice and Police sectors.

It is the perfect example of how the industry’s desire for long-term certainty and stability in demand conflicts with the uncertainty and short-termism of the electoral cycle. The Cabinet Office, which compiles the report, is at the mercy of the myriad parts of the public sector responding to their requests for information. Each contributing organisation then takes its own view on the criteria which should apply for inclusion of projects on the list. 

"We have a pipeline whose data is so incomplete, and which fluctuates so wildly and erratically that the industry can place no detailed reliance on it.."

In this case it appears some officials have felt it would be prudent to take projects off the pipeline now, applying a logic which says it is a new Government and they need positive endorsement of the projects before they can be included. 

So should the industry be concerned? In truth I don’t expect we will see anything like the scale of cutback in capital programmes that the industry experienced in 2010, after the last election, but there is clearly cause for nervousness about the potential squeeze in spending.

The bigger issue for me is that the machinery of Government is currently incapable of producing this information on a consistent and reliable basis.

Richard Threlfall is Partner and UK Head, Infrastructure, Building and Construction at KPMG

Comments

The consistent message from business to Government at every gathering of business leaders and industry professionals, is that Government (of any political persuasion) needs to be consistent with its policy and planning. It is a message that Government consistently refuses to take on board.