In the Summer Olympics of 2012 the UK successfully demonstrated that it can deliver a major global project on time and to budget (leaving aside the G4S personnel shortages covered by the British soldiers). In recent times I add the magnificent High Speed 1(HS1) rail link from the Channel tunnel to St. Pancreas Station, London. Hopefully this bodes well for HS2 to Birmingham and beyond although critics hold that is expensive and has little benefits over costs. Again worth noting that China has built an extraordinary amount of infrastructure in recent years which will become utilised with the country’s continued growth.
At the beginning of the 1990’s to avoid further government borrowing during straightening times, the Private Finance Initiative (PFI) was developed for public sector procurement of hospitals and schools. Critics rightly said it would be more expensive in the long term as the government could borrow more cheaply than anyone else for such large scale long term projects. Later in the 1990s came the Public Private Partnership (PPP) created to continue the need to restrain public borrowing – in the short term anyway – and add value for money, as was the political spin at that time from the New Labour administration. The London Underground being an example of PPP in the UK. The £17 Billion Crossrail project in London – although involving much private sector participation – is a creation of Act of Parliament and sponsored by the European Investment Bank.
Politics and cost benefit analysis aside, the growing use and successful completion of larger projects has derived in part from the use of the New Engineering Contract – which is clear in apportioning responsibilities and conflict resolution. A decent contract document solves or prevents problems and delays from even occurring. (Pity the Edinburgh Tram project never used it since completion never seems nearer or the budget continuously unrevised). Thus financiers, insurers, cost and project managers and of course commercial law and accountancy firms have built-up expertise, documentation and techniques for use in all types of infrastructure in the UK and internationally, which further benefits the UK GNP. This is an invisible exports contributor for the exchequer which is a help during a weaker domestic economy.
Other countries such as Canada and Australia have adapted PFI and PPP type contracts for their own projects. Massive opportunities exist with India with which UK firms – including the construction functions of a consortium – should strive for some market presence over the coming years. The USA, the world’s largest economy, needs a lot of replacement infrastructure, so again UK companies could benefit from projects if the politicians can stop the political gridlock and concentrate on the matters in hand that are required to maintain the world’s largest economy.
With all this acquired expertise and a pressing need for projects to commence in order to provide a boost to the economy and provision of much needed infrastructure replacement whether it’s roads, railways or schools and hospitals. The perplexing issue here in the UK, and elsewhere too, is why it seems such a drag to raise the funding? The coalition government’s Chancellor George Osborne has promoted infrastructure spending in all of his recent budget speeches to create a £20Bn fund for such projects. However, a mere £2Bn has been raised so far. I noted that Allianz Global Infrastructure, a unit of the German re-insure Alliance AG, is now becoming active in raising funds for this purpose. This is to be encouraged and I hope swift progress ensues because with increased flooding of late and general use ever rising, it can’t take 20 years like the M6 toll road did to open (although a fine piece of motorway).
Bluntly… if it takes a government guarantee in the early stages to provide the confidence for consortiums to invest and commence, then provide them! A government with a printing press can run off a couple of billion pounds more to provide something that is far longer lasting and tangible than a bank bail-out – and since 2008 they’ve certainly got the expertise of that.
Finally, although the nuclear power plant renewal negotiations have a history of their own. The issue of whether we want our lights to stay on – or revisit power cuts of the 1970s – caused by “brown-outs” this time rather than strikes deserves a whole blog of its own.
LDC