Four priorities to stimulate growth

A Conservative majority, albeit slim, is good news for Infrastructure but Government needs to make some quick decisions, says EC Harris’s Mathew Riley.

Lobbying the last government saw progress through the National Infrastructure Plan Strategic Engagement Forum, the commitment to London’s long term economic plan and the northern corridor. But we now need to convert good intention into reality.

This government has to build on these foundations and accelerate policies that will lead to delivery. Delivery that will create confidence in markets and stimulate economic growth, and delivery that will start to provide the next generation of infrastructure.

I believe there are four priorities to stimulate growth;

1.    Runway capacity in the South East. In reality the Davies Commission is going to tell us nothing new. Alastair Darling’s Aviation white paper in 2003 clearly stated that “air travel is essential to the UK economy and our continued prosperity”. The paper called for two new runways in the South East by 2030, with the first being built at Stansted by 2012! The reality is that we need two runways, not one as the Davies Commission is tasked with recommending. This government should make the decision to proceed with new runways at Heathrow AND Gatwick. 

2.    Energy. The weakest part of the Conservative manifesto is its energy policies. It is luke warm about anything other than new nuclear and gas. New nuclear is in continual delay as the technology becomes ever more expensive, and our dependency on foreign investment means this government will be faced with the harsh reality of having to pay more, or start to look elsewhere. This could be good news for offshore wind investment. Hitherto seen as a poor return on investment for the public purse, it is a major plank of the SNP energy policy. This should be where this government seeks to collaborate with the SNP in return for concessions elsewhere.

3.    London How many times have we heard that investment in London is also good for the rest of the UK, yet much of the rest of the UK does not seem to see the argument? This government needs to quickly find a way to communicate this story if we are to invest in HS2, HS3, Crossrail 2 (to name but three), otherwise there is a risk these projects become political footballs. 

4.    Modernise regulation. 75% of our investment in infrastructure is now dependent on private funding. We have seen our regulatory system become increasingly political, and the reaction of the financial markets last week is testament to how big an issue this has become. The challenges we face in replacing our aging infrastructure are far more complex than the days where we just had to provide new capacity. Yet regulators continue to squeeze every last drop of efficiency out of these companies, without realising the delay being caused to replacing our crumbling networks. This delay will cost consumers far more in the long run, and if you have any doubt just look at what nuclear new build will do to future energy tariffs! The sooner politicians realise private investors need a sensible return for the risks they are now being asked to take on, the sooner we move away from piecemeal development to the proper coordinated regeneration of whole communities.

With the rail industry’s CP5 spending period, Highways England, increased devolution to our cities, there are reasons for optimism, but delivery is still fragile without these changes. Industry cannot invest in the skills and technology we so desperately need if it does not have confidence in the market. It is within the gift of this government to use infrastructure to stimulate economic growth, it just needs to be bold and take action.

Mathew Riley is managing director, infrastructure & environment, EC Harris