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5th December 2017
The Chancellor’s pledge to invest more than £2 billion in new transport and infrastructure schemes suggests the civil engineering sector is one of the main winners from the Budget. The new £1.7 billion Transport for Cities fund should mean a wide range of new schemes to improve connections within urban areas should now go ahead.
Half of the new funds will go to the combined authorities with elected mayors; £74 million for Cambs and Peterborough, £243 million for Greater Manchester, £134 million for Liverpool City Region, £80 million for West of England, £250 million for West Midlands (where a Birmingham-Dudley Tram Line is planned) and £59 million for Tees Valley. Local authorities will be able to bid for the remainder of the funds.
Meanwhile, a new East West Rail Company is being set up to speed up work on the central Bedford-Cambridge section of the new rail line which will eventually link Oxford and Cambridge, with completion envisaged by 2020. It forms part of a drive to foster growth across what has been dubbed the Cambridge-Milton Keynes-Oxford corridor. It includes scope for some ‘significant new settlements’, which will partly private funded and a housing deal involving 100,000 new homes in Oxfordshire alone by 2031.
The Budget announcement of a new £79 million link road between St Austell and the A30 in Cornwall and £98 million towards a new Third River Crossing in Gt Yarmouth should provide a welcome boost for civils contractors in the regions. However no additional commitment on funding for Crossrail 2 was included in the Budget.
Yet the outlook for civils contractors remains dependent on the timing of new project starts. The latest Glenigan forecasts suggest that new work project starts in the sector will actually fall by 8% this year and a further 15 % in 2018 (although these largely cover projects valued at under £100 million).
However, a stream of major projects is underway which should buoy up the overall workload in the sector. As well as schemes such as Thames Tideway, HS2 and Hinckley Point C, work on other major infrastructure projects including the transformation of Manchester Airport’s Terminal 2, the extension of Manchester Metrolink and continuing work on the £1.5 billion upgrade of the A14, should help to keep the industry busy.
Smaller civils contractors should also benefit from the extra £45 million announced in the Budget to be spent dealing with England’s estimated 900,000 potholes. The new local infrastructure rate - under which the government will lend local authorities in England up to £1 billion at favourable rates to support infrastructure projects that are “high value for money” - should also provide a boost for civils firms in the regions.
The long term potential in the civils sector will be underlined when The Infrastructure and Projects Authority publishes an update to the National Infrastructure and Construction Pipeline next month. According to the Budget statement, this will set out a 10 year projection of public and private investment in infrastructure of around £600 billion.
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