24 January 2019

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All that glitters…

Last week, the UK’s Infrastructure & Projects Authority published a pipeline of £600bn-worth of projects for the next decade. But a little light analysis suggests all is not as it seems.
All that glitters…

“With £600bn of investment over the next decade…we are taking the long-term action required to raise productivity and ensure the economy is fit for the future,” said Exchequer Secretary Robert Jenrick, as he announced the government’s 2018 National Infrastructure and Construction Pipeline.

It is certainly an impressive-sounding figure. After all, £60bn per year should be enough to fund quite a few different projects across the country.

However, drilling down into the projects and numbers behind the pipeline suggests that this investment is not necessarily coming from a sudden ‘end of austerity’ and a turning on of the taps by Chancellor Philip Hammond.

To begin with, the spreadsheet containing all the projects includes a host of schemes that are already listed as ‘active’, or ‘in construction’. So much of this money is not new. Among examples of projects contained in the list are things like the Thames Tideway Tunnel, as well as the government’s Priority School Building Programme. Hardly new projects that will have investors licking their lips with excitement.

Indeed, filtering out all the projects that are already in construction or active sees the total capital expenditure cost of all funding drop from £600bn to £266.5bn. Add to that the fact that some of those listed also have an ‘in construction’ date of 2018 or earlier brings the value down to around £190bn.

Of that, £87.9bn is accounted for by ‘Post 2021 Generation’ of electricity. Again, not so much a pipeline here as a wishlist. Another £19.6bn is accounted for by Hinkley Point C.

Now we are down to a figure of just over £83bn. Still not to be sniffed at, but now we are looking at investment of less than £10bn per year instead of £60bn.

So what of the opportunities for PPP-type arrangements? Taking out the private sector funding source (which generally refers to projects such as electricity generation, where there is little or no government input) brings the total capital expenditure down to £50.6bn, but many of these schemes will of course be completely centrally funded.

The truth here is that, with PF2 having been abolished, there are a number of plans that are currently uncertain of their funding routes. Highways England’s A303 and Lower Thames Crossing schemes, for example, are listed as having funding from ‘central government’, although that does not mean they will not be privately financed.

There is a little more detail offered in the ‘analysis’ that goes with the list of projects, with a number of brightly coloured graphs showing how much is being provided by different sources of funding. (As an aside, I remember then IUK chief Geoffrey Spence once enthusing that the good times must be coming back because the Treasury bean counters had allowed the unit to use more than greyscale in its graphs – the end of austerity must really be here if the latest publication is anything to go by).

However, it is not easy to pull out from those graphs exactly how much is accounted for by the red block of ‘mixed funding’ (the euphemism of choice from the Treasury over PPP-type arrangements, including things like the UK Guarantees Scheme and regulated asset base, but also covering projects comprising local and central government funding together). Energy, for example, has just the tiniest of red lines next to it, while transport has a much more substantial block of red, which starts somewhere after £50bn but stops some way short of £60bn. So is that about £5bn? It seems those figures are not available, so it is impossible to tell how much investment will come from ‘mixed funding’ – never mind purely PPP-type investment.

Whatever the answer, the one thing that is clear from all the numbers, figures and graphs is that Jenrick’s pledge of £600bn of investment over the next decade is not all it’s cracked up to 

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All that glitters…

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Last week, the UK’s Infrastructure & Projects Authority published a pipeline of £600bn-worth of projects for the next decade. But a little light analysis suggests all is not as it seems.

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