Getting their priorities in order

The UK government has published a new ‘plan for growth’ that includes a role for infrastructure. Paul Jarvis takes a closer look

“An essential foundation of growth is infrastructure.”

This was how UK Chancellor Kwasi Kwarteng introduced the section of his ‘growth’ speech focused on infrastructure investment. Unlike the Boris Johnson administration, the new regime did not spend a lot of time shouting about the potential of the green economy to lead the country out of economic depression, but instead tried to focus on more immediate impacts that they hope will curb the cost of living crisis.

The big statement for the infrastructure industry was the heavily trailed pledge to establish ‘investment zones’ across the country, with the market responding positively to the idea of targeted investment in certain areas. Stephen Beechey, group public sector director at Wates Group, said the zones would “allow businesses like Wates to deliver the much needed housing, schools and hospitals across these areas”.

Kwarteng and his prime minister, Liz Truss, are hoping that these zones can kickstart growth in a number of different locations, and have already begun discussions with some areas to enable them to start establishing these zones in the near future.

However, how their success will be measured remains unclear. At present, the plans will see chosen sites benefiting from tax incentives, planning liberalisation, and “wider support for the local economy”. What this will look like - and crucially how much of this wider support will involve government (local or central) investment - will be critical to the success of the investment zones.

On the green agenda, while the government will have offended plenty of campaigners with its earlier announcement that it was lifting the moratorium on fracking, its proposals to remove planning barriers to onshore wind developments will have gone some way to sweetening that pill.

“Removing additional planning barriers to onshore wind developments in England is the right thing to do and recognises the major role that wind energy can play in boosting domestic production,” said Sir John Armitt, chair of the National Infrastructure Commission. 

However, there was a general feeling that the new administration had been less bold on green infrastructure than under Johnson, when the drive to Net Zero was set in motion. Truss has already launched a review into how the government will meet its Net Zero ambitions, but given that this ‘mini Budget’ was meant to combat the UK’s energy woes, a further commitment to renewables energy investment might have been expected.

“While we support much of this programme, we believe the government can take bolder steps to encourage the private sector to deliver growth through Net Zero projects, such as energy efficiency, which would further tackle the cost of living crisis we face today,” said Beechey.

Armitt agreed, arguing: “We also need to put wind in the sails of other major projects, including offshore wind and water supply infrastructure, which serve the national interest while ensuring proper engagement with local communities.”

Kwarteng also announced a new list of ‘priority’ infrastructure projects where their delivery would be accelerated.

However, despite producing a long list of deals to be accelerated, it remains far from clear how this list of priorities will be pushed through at a faster pace than at present. 

For example, one notable inclusion on the priority list is Sizewell C, the huge nuclear programme that is currently in planning and has already seen government pledge to invest alongside EDF and a range of private investors. It is understood that the scheme is currently discussing with potential investors to find the necessary cash for the scheme, while the planning process is also well in train.

It is therefore not clear how the project could be accelerated at this stage, other than to create a new planning regime to fast-track its delivery. Kwarteng did talk about speeding up the planning process for major infrastructure projects - but this would affect all schemes, not simply Sizewell, or others on the priority list.

As one industry source suggested, the priority list looks similar to the age-old demand from politicians for ‘shovel ready’ projects that can be pointed to as examples of where they are ‘doing something’, even if that something has been several years in gestation. Few would suggest, for example, that Sizewell C has not been a government priority in recent years.

There was no mention of using private finance in the infrastructure sector - although Kwarteng did say that the government wants to “unleash the power of the private sector” to help its ‘levelling up’ agenda. 

With the pound falling significantly on the back of the market’s negative response to Kwarteng’s plans, and the Bank of England base rate expected to continue to rise as inflation remains untamed, ambitions to deliver new infrastructure may only be possible with a greater use of private cash.