Spending Review Construction Special: “Once in a Generation Investment in Infrastructure”
The Chancellor confirmed a “once in a generation investment in infrastructure”, outlining £100 billion of capital spending in 2021-22, a £27 billion real-term increase compared to 2019-20.
Funding will be targeted at high-value, job-creating projects that are deliverable next year including:
The Spending Review also maintained momentum on the government’s infrastructure plans with multi-year capital settlements including funding to start the delivery of:
The Chancellor announced a new National Infrastructure Strategy, outlining the government’s long-term vision for transforming UK infrastructure. Plans include the creation of a new UK infrastructure bank located in the North of England from next Spring. It will co-invest alongside private investors through a mix of loans and guarantees as well as taking equity stakes in projects.
The Chancellor also announced a refreshed set of funding rules for government schemes. The new rules are expected to increase the viability of proposed projects outside of London and the South East.
Allan Wilen, Glenigan’s Economics Director, commented on the announcement: “In our latest construction forecast we had already highlighted the Government’s pledge to significantly increase investment in the UK’s infrastructure and so it's great to see that confirmed again by the Chancellor.
Whilst the spending review is generally only for the next year, the Chancellor has reiterated and provided greater detail to longer term capital spending plans. This will enable departments to move ahead with planned investment in a wide range of construction areas from social housing to schools, hospitals and infrastructure.
The Government already announced that the second Road Investment Strategy (RIS2) will spend over £27 billion between 2020 and 2025, taking forward schemes such as dualling the A66 Trans-Pennine route, and upgrading the A46 Newark bypass. These will take time to be ‘shovel-ready’, but may boost the sector towards the end of 2022.
Increased investment in the national road network is anticipated as Highways England brings forward projects under its collaborative framework. We anticipate that, initially, the additional funding increases will be directed at starting smaller improvement schemes and areas such as tackling the maintenance backlog on the nation’s roads.
In addition, Network Rail’s new five-year investment programme (CP6) is now underway. Within the programme, £4.1 billion has been allocated for maintenance and renewal work during the current financial year, a 23% increase on 2018/19. A further 12% increase in spending is earmarked for 2020/21.
The Spending Review has confirmed our expectations set out in the Glenigan Construction Industry Forecast published this month that increased investment should help to lift civil engineering, health and education project-starts by 17%, 11% and 33% next year respectively. As forecast the spending review should also boost social housing activity from next year with capital funding for affordable housing set to rise by 20%.
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Rhys Gadsby (Economic Analyst)
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