The latest infrastructure report from ACE aims to review and analyse a range of material that is openly available (such as economic papers, cost benefit analysis and case study evidence) in an attempt to ascertain what effect infrastructure investment has on the economy. This paper will not however go into the mechanisms that would fund such projects but attempt to demonstrate the scale of potential the contributions the construction and infrastructure sector could make.
The economic rationale behind investment decisions has not been as important as it is during this economic cycle given the recent recession, tightening credit conditions and proposed public sector cuts. Projects need to demonstrate that they will improve the future growth prospects of the UK.
The return upon infrastructure investment was found to vary significantly not only between projects, but also across countries. Theory suggests that achieving a positive economic effect from investment relies on the current level of provision in respect to that of the optimal (equilibrium level), maintaining the long run competitiveness of the economy, investor certainty, access to capital, accounting for externalities and market failure, and creating a conducive regulatory environment.