Steves Blog

The Economic Case for Infrastructure Investment

31 January 2014

In December 2013 the Government issued its latest version of the National Investment Plan (NIP).

The NIP was first published in 2010 providing a holistic and strategic approach to infrastructure planning, funding, financing and delivery of major projects across the UK, including roads, railways, airports, energy, telecoms, education and flood defences. The NIP also sets out to address the historic problems of short-term decision-making, uncertainty on funding and financing and to learn crucial lessons on past failures in delivery. The latest pipeline of projects total £375billion, which will delivered over the next decade, of which £100 billion is committed to be invested during the next parliament.

So, why is the Government investing such significant amounts into the UK's infrastructure?

There are a number of political and economic drivers for this level of investment. Firstly, there is a requirement to make up for many decades of under investment. A study issued in 2013 from the Civil Engineering Contractors Association estimates that had investment in the UK's infrastructure been commensurate with that of our European and Global counterparts the UK's GDP could have been 5% higher each year between 2000 and 2010. The same study also calculated that for every £1 invested in the UK's infrastructure the GDP would increase by £1.30, generating almost £500billion to the GDP over the next 10 years based on the current pipeline of projects stated in the NIP.

Another compelling reason to invest in infrastructure is that for every 1,000 jobs required for infrastructure construction a further 2,053 jobs are created in the supply chain and other sectors producing and distributing consumer goods. This coupled with the fact that the UK's population is estimated to grow from 63.7m to 73m between now and 2035, makes for a compelling case for better and more efficient infrastructure, which in turn will provide greater capacity across the UK.

This said, although there is a sound economic case for this level of investment in our infrastructure, it is not always the case that the political drivers of an incoming Government will be aligned with the current investment plan.

To this end, it may be all change post 7 May 2015!

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