The Chancellor should be bold
The UK infrastructure sector is in desperate need of clarity and conviction, which is causing uncertainty at an unprecedented level. It is understandably hard for senior leadership and boards to commit to the investment we need to grow. That lack of confidence is putting our world-leading delivery expertise at risk.
The sector contributes to 7pc of UK GDP, a figure that dramatically jumps to 30pc if you take into account the economic benefits it creates for the entire economy.
Despite this, investors are being even more cautious with whom they invest; whether that’s in specific projects or companies that wish to innovate to bring new, better solutions to market.
Our supply chain, which is already being hit by forthcoming reverse charge VAT changes, is nervous about committing to delivering the big projects that will make or break our economic performance over the next decade. The UK’s construction industry is hugely biased towards small businesses and sole traders; businesses that live and die based on the next month’s financial performance. In those circumstances, uncertainty is a disaster – and so you can forgive our sector for being nervous about what the future holds.
The Chancellor has announced a short spending review, due by September, which will shape our public finances through the next 12 months and beyond. Although it is likely that it will be overshadowed by the continuing brinkmanship over Brexit, this is a crucial juncture for the UK economy; and certainly a big moment for Sajid Javid.
The decisions made now will define his tenure as Chancellor. Will he be bold and brave and put forward a positive, pro-growth agenda? Or will he hedge his bets? If he does have the courage to stand strong and be bold, he has in his hands a huge opportunity to provide industry with the confidence it desperately needs to plan for the future. That means a tangible commitment to infrastructure spending – a clear statement that the days of indecision and prevarication are done, and that Prime Minister Johnson’s administration wants to build a genuine legacy for the future.
The National Infrastructure Commission has argued for a guarantee that we’ll spend 1.2pc of our GDP every year on delivering the infrastructure we need. That 1.2pc would secure jobs across the UK, ensure that our infrastructure continues to improve – and crucially, it would unlock the growth that we’ll need to make our post-Brexit economy a success. For my business, it would mean that we have the confidence to continue to invest in our people, our projects and the research and development we need to deliver world-beating innovation. Beyond that, it would send a clear message to the world about the Government’s ambitious vision for the future.
By now it should be clear that infrastructure investment is a multiplier and that every pound spent drives more growth. A guaranteed annual spend of 1.2pc would recognise that.
But that 1.2pc by itself will not be enough. Alongside that guarantee, I would also argue that we need to commit to the big projects that will shape our country for decades to come. At the moment a huge question mark hangs over our ambition. Northern Powerhouse Rail, HS2, the third runway at Heathrow and our nuclear power pipeline are all crucial programmes that have the potential to deliver huge benefits to the economy.
A commitment, up front, to deliver all of them would be transformative for UK industry. At a stroke, it would give us the clarity and confidence that we need to make the decisions that will unlock our future growth. Combined with a guaranteed infrastructure spend every year, it would ensure that our post-Brexit prosperity was set in stone.
I don’t envy the task that our new Chancellor faces. Delivering a spending review that will be resilient in the face of any potential Brexit outcome is a challenge beyond most of us. But without clarity and conviction, there is a risk our sector’s expertise and delivery capacity will waste away.
The signs are positive. It is clear this Government recognises infrastructure spending is an important element of any positive vision for the future. However, with a no-deal Brexit on the horizon, we need to recognise that any big spending commitments are a risk. Committing to the big projects and a guaranteed annual spend won’t be easy – and it certainly won’t be popular with parts of the Tory faithful.
Let’s all hope that our new Chancellor is up for the challenge.
This article was originally published by the Telegraph.