With the IMF this week downgrading the UK’s 2012 growth prospects from 0.8 per cent to 0.2 per cent, today’s announcement that the government is to underwrite £50bn of investment in infrastructure and exports is being cautiously welcomed by an industry that’s crying-out for a growth strategy.
The key element of the package – the “UK Guarantees” scheme – will see the government underwrite £40bn worth of funding for a host of critical infrastructure projects across the transport, energy, utilities and communications sectors. The aim is to reinvigorate projects that have stalled due to difficulties raising money from private investors. According to a treasury statement, the first recipients could be identified as soon as this autumn.
The other elements of the package are a £6bn temporary loan scheme to shore up around 30 public-private partnership infrastructure projects can go ahead and a £5bn scheme that will support British exports by providing loans to overseas customers.
The announcement has been welcomed by many, including CBI director general John Cridland who said that it should help “fire up” Investment and exports, the “dual drivers of future growth in the UK.”
The Institution of Civil Engineers also praised the intention to get infrastructure projects moving, although its director general, Nick Baveystock, warned the government not to make the criteria for accessing the guarantees excessively difficult.
Meanwhile, more vocal critics of the scheme are concerned that, once more, the taxpayer will end up taking on the private sector’s liabilities. And the claim by the chief secretary to the Treasury, Danny Alexander, that “[this] would only happen if something went wrong” is hardly likely to reassure a public that’s increasingly sceptical of the government’s ability to handle big projects.
What’s more given that qualifying projects must be able to start work within 12 months, and must have a positive impact on economic growth it’s questionable whether the scheme will actually stimulate anything other than projects which would have happened anyway.
Nevertheless, as we’ve long argued on The Engineer, unlocking investment in infrastructure will be key to the UK’s economic growth and the insistence that qualifying projects must begin within the next 12 months will put pressure on the government to deliver on its promises.
In the meantime, the Treasury has steered clear of identifying specific projects. But with energy, transport and utilities looming large in the plans, we’ll wager that the long proposed Severn Barrage, and increased airport capacity for South East England will once again enter the running.