Infrastructure spending - 2013 roundup

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On Friday the Output in the Construction Industry 2013q4 figures were released, rounding off the picture for 2013. New infrastructure starts by volume increased across the year, and as we pointed out in a recent blog, increased investment in infrastructure is planned to continue over the coming years.

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The vast majority of this is in rail, as opposed to roads, which in itself faced underinvestment and is a key issue for manufacturers (by a significant margin).

In addition, the figures released report how much was spent, not how well it was spent. We've highlighted before the value for money issue, particularly within local road spending, but this is an issue more broadly, we've made reference to this before but it is worth highlighting what Infrastructure UK's cost review found:

  • 'Sustained uncertainty and the cyclical nature of infrastructure investment in the UK has contributed, over several decades, to a significant shift from fixed to variable resources, i.e. there is a greater use of subcontracting and less direct investment in construction. Lower capitalisation and the higher levels of subcontracting increase the internal transaction costs in the UK, in particular through the premium cost of risk transfer down the supply chain to second and third tier supply chain providers.'

Setting this to one side however, infrastructure spending is slowly moving in the right direction. The best way to get value for money and ensure this acts as a catalyst for business investment both within and outside the supply chain is to ensure stability and certainty moving forward.

The National Infrastructure Plan 2013 finally explained the logic behind each of the 'Top 40 projects', which is something we called for. However most of the public investment as part of this plan is to 2020/21. What will be the criteria and the requirement for projects beyond that? What could we be doing now to ensure we don't retreat toward a stop-start investment approach again?

As we inch closer toward 2015/16 when a new round of funding will be released, now is the time to start setting in motion a framework for national infrastructure planning for 2020/21 and beyond.

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