BUILD. BUILD. BUILD.

Focusing on the needs for infrastructure.

Even in the pre-covid environment where the world was already facing a $15 trillion infrastructure gap that needed to be filled by 2040. The World Economic Forum research at this time set out that global governments top priority was catalysing greater investment in global infrastructure, and with infrastructure providing an enormous economic multiplier reported of 1:6, such that for every 1 unit spent on infrastructure the economic benefit will be 6 times greater.

A period of sustained under investment in the UK has resulted in a period of marked deterioration in the quality of our infrastructure provision. Expenditure dropped by 25% from 2009-14, a study by EY revealed that should this trend continue in the UK there would be an annual loss to the economy of circa ￡93bn by 2026. So, infrastructure already had the government’s attention.

The delivery of infrastructure for transport, communications and energy offers the key to opening up and better connecting the whole of the UK, with a holistic view to delivery taken through the National Infrastructure Commission's much awaited strategy (due to be published in the Autumn 2020).

The CBRE Our Cities campaign recognised that to achieve city growth, a key enabler was infrastructure. We emphasised the need for good governance whereby city leaders set the vision and strategy, as well as pump prime infrastructure projects through government funding, but then the private sector steps in to finance and deliver these ambitious programmes.

And they are clearly prepared to do so. Investors too seem to like infrastructure projects for their stability and longevity, with projects like London City Airport attracting the Canadian Ontario Teachers’ Pension Fund to buy it for ￡2bn in 2016, way above the original sale in 1995 of just ￡23.5m, or when GIP bought it in 2006 for an estimated ￡750m.

Just last week our Prime Minister set out ‘Project Speed’ with a specialist task force being established to fast-track the UK’s post covid economic recovery aiming to invest ￡250bn in infrastructure. This came from the government both recognising the economic impact of infrastructure projects to enhancing the wider economy, whilst also creating jobs in construction, but also that these projects need more pace to get going from shovel ready to delivery, as well as providing the much needed connectivity in ‘Levelling up’ the UK . They realised it could be done following the expediency of the way in which the country responded to the Covid-19 pandemic in constructing the NHS Nightingale hospitals.

As the UK government looks to unblock infrastructure projects, our role is to enable them ….. so that they are strategically planned, delivered at pace, and in a way integrated with development plans so that land values can help support the cost.

Some of the planned programmes include:

?     Continuing the investment in transport schemes through the building of the rail, road and air programmes we desperately need to connect across the north and to open up the UK for business. With rail and air having been hard hit through COVID-19, these areas will be particularly key.

?     Port redevelopment rights to facilitate imports and exports through larger docking and shipping facilities. 

?     Utility asset management and development coupled with regulators driving changes in the way these businesses focus and operate.

?     A focus on green energy and off-shore backed by a package of development incentives with energy needing to become cleaner and greener as we seek to deliver the Paris Climate Compact to reduce carbon emissions.

?     Technology and telecommunication enablement the lifeblood to the future economy.

With people not travelling these businesses are feeling the pressure. Infrastructure clients need to focus on rapid business transformation many are under huge scrutiny from government and shareholders alike to deliver, and they need our help. What we are discussing with our clients is how from Covid-19 we look to help transform their businesses to capitalise on the change and opportunities, particularly in:

• Developing a comprehensive strategic plan and portfolio review across their assets to optimise value and take out unnecessary costs;
• Deliver their planned programmes and fast;
• Understand regeneration potential and optimising a sense of placemaking;
• Demonstrate decarbonisation & renewables;
• Look at ways of enabling the funding & financing of infrastructure schemes;
• Having an accurate valuation of the asset potfolio so that value enhancement can be clearly demonstrated.

What is needed is a review by the Infrastructure and Project Authority to look at enabling and prime funding critical infrastructure, in a similar way to Homes England, such that shovel ready schemes can be brought forward and delivered.

So, what could be the single most meaningful priority for business and government to work towards in order to level up?

Infrastructure. Lots of it, strategically planned, delivered at pace, and in a way integrated with development plans so that land values can help support the cost. We need government to unblock infrastructure programmes across the country, and we need to get behind delivering them.  

Now is the right time where we can help create value beyond just property through infrastructure assets to help deliver Project Speed for the UK and get those shovel ready projects into delivery through: Build. Build. Build.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the CBRE organisation or its member firms.