Pipelines or Pipe dreams? Is the UK construction market doomed to fail?

Introduction

The latest post from construction news, reveals some insight to future projects the UK government plan for the coming decade. This includes up to 660 projects, with an estimated ￡775 billion.

A whopping 64.7% shall be focused on energy infrastructure & further 16% on transport. Both areas which greatly need improvement throughout the UK. This does beg the question, after seeing the epic failure of HS2, already a 15.09% over budget, and scrapping, to what many believe the “more ?needed improvements”, the northern leg of the line. That said, if, all is to be completed, the project should be finalised by 2045.

How has the island that founded the industrial revolution & boasts the oldest underground network in the world, become so poor at construction?

Has bureaucracy corroded the ability to for construction projects throughout the UK?

In 2008, the Planning Act 2008, was an attempt to speed up large infrastructure projects within the UK & NI, which included, transport, energy facilities & waste facilities. These would also coincide with the 2008, Climate Change Bill. The concept was initially controlled by Infrastructure Planning Commission (IPC), which was approved a year later in 09, before being effective in 2010. However, a year later, the Localism Act 2011, abolished the IPC, allowing local governments to control local projects.

Then, in typical fashion, IPC’s were transferred to Secretary of State (SoS) in 2012. These are now referred to as NSIP, Nationally significant infrastructure projects, which are given planning permission, via Development Consent Order (DCO). Full circle, this body is intended to by local governments & managed by Planning Inspectorate for England (PINS).

PINS, are an executive agency of the Department for Levelling Up, Housing and Communities of the UK government, responsible for making decisions, recommendations and advice on a range of land use planning-related issues across the UK. Please note, each Dominion of the UK has their own body.

The Planning Inspectorate deals with planning appeals, nationally significant infrastructure projects, planning permission, examinations of Local Plans and other planning-related and specialist casework. Historically, the PINS traces itself back to the birth of the UK planning system, Housing, Town Planning Act 1909.

So, what is deemed as significant?

A lose term used, as what could be seen as a nationally significant project, could be in many cases), this can be a small road connection, including a single road to a dual carriage way. An example of this, is the A428, a 15KM which has been disputed / delayed for 23 years (perhaps an extreme example?).

So, why the delay?

The above process, above ultimately takes to long, costs more money & ultimately disincentives projects & investors. Despite the NIPS being a non-departmental, reporting to the SoS, this should take circa 18 months. In theory, applications should be broken down as;

·?????? 28 days for acceptance

·?????? 6 months for examination

·?????? 3 months for recommendation report

·?????? 3 months for SoS to make decision

However, the above only adds up to 13 months, not 18 months. The remaining five months or so is the length of time between acceptance and the examination process beginning.

Almost 30% of projects are delayed by an average of 7 months, and some up to 4 years before decisions are made.

In 2017, it was recorded that the average delay time was around 22 months, and that 43% of projects have no decisions made within 18 months of submission (

What happens to costs & prices to projects?

Naturally, recession, inflation, rate hikes results in a direct impact on individuals & businesses alike. A report, by the financial times suggests, a 25% rise since 2020. This, coupled to several factors which we are all familiar with, Brexit, Covid-19, the Russian Invasion of Ukraine, issues in the Suez canal, the list goes on and on.

Though it does beg the question, that if our European counterparts have been able to continue with such mega projects and National infrastructure projects, why are we in the UK lacking?

As a comparative of pricing, the UK average cost for rail-lines are circa 676 million, per mile, opposed to French being 345m, which is our closest (most expensive) counterpart, or 113m in Spain (the cheapest per mile). This has been taken into costs adjusted to inflation too.

How, and why can this effect insurance?

In part of the project delays, the national policy statements (NPS’s) are not being updated. This is what developers use, in part to as a blueprint. These are meant to be updated every 5 years, but, they have not.

As part of this, legal challenges are being made against projects, which do meet existing policy statements. In turn, this causes more delays, and most costs associated with projects. A small doom loop occurs due to this.

As we have seen the hard market dip into a soft market, are we likely to see more claims occurring due to these project delays and claims made against project managers & developers? Ensuring that the language being applied to your insureds work, will cover them for such disputes & claims.

Directors & Officers policies have seen a surge in lawsuits being made against them, with a focus on ESG policies. Could, NPS’s policies trigger a new wave of notifications throughout the UK construction market?

In a follow up article, I will aim to discuss how the lack of development thought out other regions of the UK has detrimentally effected the UK as a whole. But, perhaps this may be a blessing in disguise, for now at least?

The information contained in these articles and documents is believed to be accurate at the time of the date of issue, but no representation or warranty is given (express or implied) as to their accuracy, completeness or correctness. The writer,. accepts no liability whatsoever for any direct, indirect, or consequential loss or damage arising in any way from any use of or reliance placed on this material for any purpose. The contents of these articles/documents are the copyright of the writer. Nothing in these articles/documents constitutes advice, nor creates a contractual relationship.

[1]

https://www.economist.com/britain/2022/11/07/the-real-reason-it-takes-so-long-to-build-infrastructure-in-britain

[2]

?https://www.ft.com/content/9cc19ce5-fbdb-4285-80ac-498f01f97dfd