he 2018 National Infrastructure and Construction Pipeline (NICP) has been published and it reiterates the government’s commitment to the investment in and development of major infrastructure projects over the next ten years – but it is not without its challenges.
Although the pipeline reflects projects and programmes with a total allocated value of £463bn up to 2020/21, it must be remembered that it is not meant to paint a comprehensive picture of likely investment over the longer-term. This is because government capital budgets for many departments, control periods and regulated utilities, have not yet been agreed beyond 2020/21. Therefore, in each year approaching 2020/21, the total value of the current forecast is likely to decrease until a new Spending Review is conducted and the funding for future control periods are established. This unfortunately renders the pipeline less valuable each year as a means of forecasting future spend for the construction industry.
Although this is an interesting document in and of itself and it goes some way to providing the certainty that our industry has been asking for, it is not as important as the Comprehensive Spending Review that is due next year.
With all of that in mind, the pipeline still has a lot to tell us about the government’s development and spending priorities as it lists nearly 700 projects that are viewed as national priority projects. An analysis accompanying the pipeline has been produced by the Infrastructure Projects Authority (IPA) and shows more than £190bn of the total pipeline investment of £600bn is to be delivered by 2021. This, however, leaves a considerable amount of work to be completed in the second five-year period.
There are also two major assumptions which underline the IPA’s analysis and should be kept in mind by the industry.
The first is that the analysis assumes a high level of offsite construction coming online from 2019 which the government – as the sector’s biggest client – believes will act as a catalyst for the industry towards greater modernisation. To facilitate this, the pipeline has been published alongside a consultation to start gathering evidence that can help deliver on this ambition. To help boost industry productivity that has continued to lag behind, the government hopes that new manufacturing techniques can boost productivity and reduce waste. The creation of the proposed Core innovation Hub, which forms part of the Construction Sector Deal, will also be a key part of this strategy.
Secondly, regional investment seems to be predicated on a high-level of private sector investment per capita that seems counter intuitive. The problem here is that the accurate regional data for levels of investment is missing and per capita investment figures are not adjusted for employment, so a distorted picture is presented by the pipeline. This does not provide the certainty that regional investors need. Alongside this, there is a lack of granularity which will make it difficult for SME’s to plan and engage with the pipeline in an effective way.
Due to this lack of accurate local data and granularity, we run into a problem linking the NICP to the National Infrastructure Assessment (NIA) that was launched in July. In the NIA transport and housing assessments are focused on city regions development, but the NICP moves government planning to the national level. This disconnect prevents us from effectively planning and targeting investment at the appropriate level.
As the NIA makes clear, local leaders making long term plans for their cities need long term certainty on funding. There is, however, a lack of long term, stable and certain funding structures to support investment due to current five-year spending cycles. So, although the NICP is a welcome step in the right direction, more still needs to be done.
Read our immediate response to the updated National Infrastructure Pipeline.