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An Opportunity We Cannot Refuse: Infrastructure

Posted: 06/02/2012 00:00

It has long been accepted that infrastructure development is a vital piece of the growth puzzle. David Cameron certainly subscribes to this mantra, having put infrastructure at the heart of his growth strategy when he outlined a huge £30bn investment over the next four years.

At Davos last week, too, infrastructure was high on the agenda. Boris Johnson, now in full election flow, came back from the slopes revealing that investors are queuing-up to invest in London, with its 'amazing and improving' infrastructure a major draw. One investor in Davos reportedly told the Mayor he wanted to invest £10bn in London.

Clearly that mysterious investor hasn't paid £2.70 for a rush hour trip into town from Clapham Common on the Northern Line anytime lately, but that's neither here nor there.

What that conversation does exemplify, however, is the huge importance of infrastructure not only in improving the efficiency of domestic business but in growing the inclination for foreign inward investment.

A recent list of the world's top 100 global projects for 2012 includes four in the UK. The possible value of the entire list is a huge $800bn and, interestingly, the four UK projects comprise a sizeable $93bn of that total.

That suggests one of two things: game-changing infrastructure projects are increasingly expensive on a global scale, or it is something specific to the UK, where large projects are either incredibly ambitious or prohibitively expensive. Whatever the answer, it is clear that infrastructure investment is a big bet - to move the needle on the UK's competitiveness in an increasingly globalised economy you have to be bold, and you have to take risk.

The UK is seen as the global centre for infrastructure expertise, largely due to our strong engineering industry added to financial and professional services expertise. This is why a gathering of the world's movers-and-shakers in this sector is taking place in London later this month, with an incredibly impressive list of organisations taking part.

I would assume the focus at that conference will not be investment in the UK - the prime minister's National Infrastructure Plan has shown the world how serious this area is taken here - but about concerns with the huge funding gap in developing countries around the world.

At a point in which the global economy is balancing between growth and a return to recession, the hosts of that gathering - CG/LA Infrastructure - estimate that investment is falling short of targets by 10-20%, or a huge $500bn.

That's 54 Olympic Games, 31 Crossrails, 29 HS2s or 625 Wembley Stadiums. In other words, a whole lot of infrastructure.

This represents a huge opportunity for a number of different sectors in the UK and a real chance to deliver on the Coalition Government's aim to export its way to growth. Britain is not only a world-leader in investing in itself, but also a leader in advising on global projects.

At a time when we are soul-searching about what future economic specialisms will look like, this is an area of expertise we would be mad not to grab with both hands.

 

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11:49 AM on 02/07/2012
Infrastructure such as rail is sold as a good bet by politicians for creating significant GDP growth. Italy has a far better train service than the UK and is cheaper due to a bigger investment. Explain then why Italy is close to bankruptcy because its abysmal GDP growth means it cannot pay back its sovereign debt. Surely it should be booming because of its superior rail infrastructure?
09:24 PM on 02/06/2012
However much we throw at this, it's in effect too little too late. The rest of Europe - no the developed and developing world - have been busily developing their infrastructure. UK PLC has done what..?? Had innumerable public enquiries and achieved almost nothing - oh except a £10bn rail electrification programme that failed on day two after it went live(sic)!! Even the Italians and the Spanish have managed to inauguate high speed rail systems on time and on budget.. 'nuf said...
01:33 PM on 02/06/2012
Yeah keep chucking money at London while the rest of the UK hits the skids. My thoughts are we'd be better off having a referendum north of Watford to join the Scots for independence than continue to be ruled by London, Westminster has proved over thirty years they're unfit to govern this whole country as they think the world ends 30 miles out of the city.
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10:22 AM on 02/07/2012
Made me laugh - very witty! But I totally agree with you, for many Londeners anything north of Watford is 'the north'.
08:39 AM on 02/06/2012
If the UK was a company with problems making a profit (equivalent to balance of payments problems) then what chioce the executives make to boost profits quickly and progressively?
Invest in new company infrastructure of invest in creating new products to sell.

The executives would choose invest in the creation of new products as this leads to profits quickly increasing year on year. Infrastructure investment will give a much slower and smaller return.
The difference between the EU and UK and rest of the world is that the rest of the world uses government money behind creating new products and services that the private sector can sell around the world.

The EU and UK thinks the best answer is to spend money on large public capital works. Which side would you put your money on to win for GDP growth and creation of new jobs for the public? The rest of the world or the EU/UK?

Clue:
Rest of the world growth for the next decade expected to be near to 10% pa leading to a doubling of the size of their economies over 10 years. EU/UK growth expected to be far nearer 10% than 100% over the whole period.