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Will infrastructure investment really rebalance the UK economy?

Rarely a day goes by without a member of the government hailing the “economy-rebalancing” properties of some project or other. Indeed, if The Engineer had a pound for every such prediction, it’s possible that we might have enough to pay off the deficit and take the entire team to the Ritz for a celebratory lunch.

But while it’s tempting to be cynical in the face of a refrain that’s becoming a little tired, we decided to subject it a little more rigorous scrutiny.

In an in-depth report that will be published in the next issue of The Engineer we’ve tried to navigate a path though the political bluster, and have asked some people who really do know what they’re talking about whether they believe major infrastructure projects could play a role in rebalancing the economy?  

From Crossrail and Hs2, to the £30bn programme of rail and road projects announced in the chancellor’s 2011 autumn statement, not to mention the huge changes occurring across our energy industry, the UK’s infrastructure  is undergoing a pretty radical transformation.

Many commentators have questioned whether this will do much for the economy, claiming that it’s more important to boost the manufacturing sector than to throw billions at projects that will, in some cases, take  decades to complete, and won’t necessarily be carried out by British companies. 

But those we’ve been speaking to over the past couple of weeks tell a different story.

Nick Baveystock, director-general of the Institute of Civil Engineers (ICE) believes the sceptics are failing to recognise the long-term economic benefits of new infrastructure.  New road and rail links in particular will, he claims,  be a major filip for UK manufacturers making it easier for them to move goods around, and putting channels and structures in place that are essential for long-term growth.

What’s more, while guarantees that work will go to UK companies will always be a thorny issue, Baveystock claims that clear long-term plans are not only the most economically sensible way to go about renewing infrastructure, but will also enable the UK to better plan its future skills needs, thus boosting the chances of those skills coming from the UK

What’s more, according to Dr Scott Steedman, one of the UK’s leading civil engineers, fears that UK contractors could lose out are perhaps misguided.  Whether or not the main contractors are overseas firms, UK workers will carry out the vast majority of the work, and most of the money invested will stay in the UK .

Another intriguing point raised by many of those we’ve spoken to is that all of this activity could create some great opportunities for the kind of UK technology firms not traditionally associated with large civil projects. With a growing emphasis on, for instance, structural monitoring systems for new buildings, or advanced sensing technologies to smooth traffic flow on roads and rail networks, the UK is ideally placed to exploit this growing overlap between once disparate areas of engineering.

Whenever politicians talk of “rebalancing the economy”, they struggle to avoid the implication that they think they’ve found a silver bullet. It’s easy to see why.  Political careers are often short and they want to take the credit while they can.  The reality is that the economic benefits are real, but almost certainly won’t be felt until long after our current administrators have left Westminster.

Readers' comments (12)

  • "The reality is that the economic benefits are real, but almost certainly won’t be felt until long after our current administrators have left Westminster." and that is the real nub of the problem that has beset the UK for the last 60 years - shorttermism at the highest level.

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  • Large scale publicly funded projects can help balance an economy but some draconian measures are needed to make such projects work; namely:

    1) A British only procurement policy which may break EU tendering rules
    2) A policy toward using suitable unemployed persons which make employment on such projects mandatory or loss of benefits will ensue.
    3) Such projects must be managed by private enterprise managers seconded for the purpose
    4) Limited use of heavy machinery to ensure maximum employment [as China seems to do].

    This converts welfare costs into useful output at little or no additional cost to the economy.

    Needless to say, no curent political party would be party to such measures.

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  • If....they use innovative British technology and British manufacturers then I am all for it. Then we can showcase the technology and sell the infrastructure to other countries, eg Brazil.

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  • Infrastructure is both essential to the economy and a way of injecting public money into it. The problem historically I feel is that the project delivery cycle is longer than the political cycle. Basically projects get a push when it is politically expedient to do so, but before they can get delivered minds are changed in Westminster and everything stops again. Never mind the £millions of wasted money on projects that never get built, we end up in a seemingly never ending cycle of stop start that is neither good for the industry or good for the economy. I know of road projects on which design work started over 20 years ago and are still no closer to being built....

    Investment in well considered good value infrastructure is good for Britain but we must stop it being used as a political football. It has become a ship circling in the ocean going nowhere as the man at the wheel tries to follow a stream of conflicting orders on which course to steer.

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  • Post Second World War Germany and Japan fought their way back to viability through infrastructure projects. Germany built autobahns and Japan concentrated on consumer goods, cars, electronics etc. The time scale was very long and they were achieved through funding from the rest of the world. The UK infrastructure projects will be funded from internal funds or long term loans and, in the end, we will end up pushing the same pound coins from hand to hand with no appreciable benefits from any "sales" to increase overall income.

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  • The only way of sorting out this country properly is to have engineers who have worked in industry run it instead of career politicians... like in China!

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  • If we move towards a more high tech, low volume digital technology based economy then we won't need improved heavy infrastructure...

    What we really need is a lot more investment in fibre optic cabling to enable the whole country to become truly engaged.

    The days of heavy manufacturing are over in the UK, this needs to be said, we need to get over it and move onto into the future.

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  • Infrastructure that we need Yes but not the wrongs ones that will benefit the few and will not add significantly to UK PLC profits such as HS2 (or realy HS1.5).

    Better projects would be 'green' energy generation such as Tidal (Seven etc) etc, a national water grid etc - In fact things that we are going to be vital in a few decades time.

    Guess the HS2 will allow the politicians to get out of London quickly when the energy and water riots occur in 2035!

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  • If the UK were any company then the first thing you need to do is reduce your costs.

    IMPORTS do without, reduce them or make in the UK the things we need.
    The failure to manage the bulk energy market is one of our biggest UK costs.

    EXPENDITURE improve internal controls
    That’s the only thing underway, and over doing it makes it less economical.

    INCREASE ACTIVITY by expanding exports. That's done by trading more of our top 200 trades to more customers’ world wide.

    There is no mystery to managing any business to a success; you just have to compromise ideals for realities.

    Unfortunately our existing government is top heavy with the skills and experience need to run any sort of business let alone the UK economy.

    The successful strategy is KISS.
    Keep It Simple Stupid - and they might just achieve the right outcomes.

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  • The previous administration created employment by putting people in public sector non-jobs. This helped to keep the unemployment figures down and also allowed the exchequer to claw back a large percentage of the cost in tax. The current thinking is to remove the excess labour from the public sector and if companies with UK employees are involved, create employment in infrastructure projects. I have to agree that this is more productive than pushing pieces of paper around. However if the infrastructure projects are publicly funded how does this cut the budget deficit an change the ratio of people in public v private sector funded employment? More importantly how does it reduce the size of the tax burden?

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