How can infrastructure investment get us out of this mess?

The public health impacts of Covid-19 have been tragic with nearly 400,000 deaths world-wide and the virus now reported in more than 200 countries. However, the economic impacts of Coronavirus could be even longer lasting and governments globally have therefore had to respond to what is an economic as well as a health emergency. Inevitably, the longer the pandemic suppresses economic activity the greater will be the need for government support to protect jobs and businesses and set a course for recovery.  Austerity might be a response to a banking crisis, but it won’t fix this!

The traditional Keynesian economic stimulus has long advocated a role for infrastructure investment in boosting economic growth. And even before Covid-19 took over our lives, Rishi Sunak’s budget on 11 March this year had already heralded an ‘infrastructure bonanza’ in the UK. But the question now is what should the infrastructure ‘new deal’ look like in the 2020’s?

This pandemic has changed peoples’ lives and their outlook, potentially for good, and so if we are to get a public mandate for infrastructure investment it is no longer just a question of spending money. What matters is how the money is spent, when and on what.

1.    We need to spend fast and deep

Infrastructure projects in general and mega projects in particular have a long gestation before they are shovel-ready and their economic benefits can be felt. If we are to use infrastructure as an economic stimulus, we need a multi-channel approach. This would aim to accelerate existing programmes (HS2, Lower Thames Crossing), do the thinking on next generation of grands projects (Northern Powerhouse Rail, Midlands Engine).  But we also need a deeper range of smaller, less complex projects which will spend quicker and allow people to experience the benefits of improvements to their local communities, for example opening up rail corridors and stations closed in the 1960’s. 

If we are to get the money into the economy quickly we also need to simplify procurement, broaden the supply chain to include SMEs in all parts of the UK and ensure that clients and first tier contractors prioritise fair payment terms to facilitate cash flow.

 2.    We need informed clients who can manage risk and deliver on opportunities

The well-publicised difficulties faced by projects such as Crossrail and HS2 means there is little public confidence in the infrastructure sector’s ability to deliver on time and within budget. If we are to overcome this we have a responsibility as an industry to be our best selves. This means much more collaboration, between public and private sectors, client and contractor, primes and subs. 

There needs to be more focus on establishing informed and integrated client delivery partnerships in line with the ICE’s Project 13 principles. Moreover, the integrated client model should be ruthless in identifying, eliminating or mitigating risk, but also looking to realise opportunities. Infrastructure is expensive and so every opportunity to draw in new sources of funding must be taken, including land value capture mechanisms and commercial exploitation of acquired land.

Informed clients also need to mobilise across the full range of project disciplines. Project focus is too often only on the core engineering and delivery management functions, sometimes ignoring critical issues like access to land and property which is a key upfront risk that, if managed poorly, can both delay schedule and add cost. Compulsory purchase is an important tool in land assembly for infrastructure, but project leaders should not be afraid to engage early in meaningful dialogue with those affected and make use of all the best practice tools to control cost and risk.

To achieve this, we need to build capacity and skills across the industry. This should focus on good project leadership through education and training. But it should also be about targeted capacity building to make the industry more attractive to women, black and minority ethnic communities and other under-represented groups. We simply cannot afford to only draw from a small proportion of available talent. 

Major projects in the past have also suffered from lack of or weak independent expert assurance. Since the global financial crisis of 2008 this has been promoted by the National Audit Office to reduce the causes of project failure and deliver improved outcomes. Working with HS2 over the last 18 months, aspireCP has pioneered a real time assurance model for compulsory purchase assisting the client in providing third party challenge and support to suppliers.

 3.    We need the right infrastructure in the right places

Whilst it is too early to draw definitive conclusions, public opinion seems likely to be influenced by the pandemic as to priorities for future spending. Confidence in use of public transport means demand may take some years to return to pre-virus levels, whereas there is now more need to invest in community and social infrastructure such as hospitals and GPs surgeries, but also new homes, flood defences, green infrastructure and street space devoted to cycling and walking. 

However, people will still need to access these facilities, and the pre-virus demands to ‘level up’ and make all UK regions more economically competitive have not gone away. So, road, rail, tram, utilities and traditional economic infrastructure will still be required.

 4.   We should build back a greener economy

With massive reductions in carbon emissions during the pandemic many are calling for a green recovery to combat the climate emergency and ‘build back better’ to maintain improvements seen in cleaner air and reduced emissions. This will require investment in low carbon innovation, infrastructure and industries, accelerating use of electric vehicles, renewable energy and investment in bio-diversity.

5.    We should embrace digital innovation

There is no doubt that global lock-downs have massively increased use of digital technology with exponential growth in use of video meetings and internet shopping. More investment in broadband and 5G therefore seems likely. But we should also embrace all forms of digital innovation, through greater use of digital design, building information modelling (BIM) and modern methods of construction (MMC) to deliver projects more quickly and safely as well as greater use of IT systems to ensure we can deliver more efficiently and effectively. To this end aspireCP and TerraQuest have joined forces to develop AFiRMS, our Acquisition and Financial Risk Management System which will for the first time automate land referencing, objection management and land compensation to give infrastructure clients the best tools to manage cost and risk for land and property.

In conclusion, the traditional model of infrastructure investment to boost economic growth should be an essential component of our recovery from this pandemic. But, the pandemic may well have changed some things forever, such that traditional infrastructure delivery models also need to change to keep up with the times.

Ian Lindsay, Senior Partner, aspireCP: June 2020

Whilst this article is believed to be correct at the date of issue neither the author nor aspireCP accept any liability for the accuracy or completeness of the information contained in this article. No part of this document may be copied or re-produced without the written consent of aspireCP LLP