Autumn Statement: The industry reaction
Experts respond to the chancellor George Osborne’s Autumn Statement
Richard Summers, RTPI president
The National Infrastructure Plan 2011 is an important step forward in outlining the government’s priorities for major infrastructure projects across the country in a way that will be useful to planners, developers, communities and investors.
We are particularly pleased to see the links that have been made between housing growth and infrastructure investment but the plan needs to go further to show the links with business development and environmental protection in our towns and cities and rural areas.
Liz Peace, chief executive British Property Federation
We’re delighted to see the recommendations in the Penfold Review put into place, particularly the encouragement on key consenting and advisory agencies to promote sustainable development.
Non-planning consents are an important consideration in every development project. The cumulative difficulties incurred with obtaining planning permission and non-planning consents can discourage the smooth progression of development schemes and in some instances, prevent them from happening. We welcome the introduction of a timescale and the clarity and certainty that it should bring.
Key elements of the Chancellor’s Autumn Statement have already emerged over the last few weeks as the Government has sought to build confidence in the wake of the Eurozone crisis. Encouragingly, the Government appears to have recognised that investment in construction projects can deliver sustained economic growth. The National Infrastructure Plan, that accompanied the Autumn Statement, identifies over 500 infrastructure projects the Government wants to see built over the next decade and beyond.
Uwe Krueger, Atkins chief executive
Now is the time for those engineering the economy and those engineering its infrastructure to be the closest partners. Atkins applauds Chancellor George Osborne for setting the framework that will entice investment into new schemes. The engineering community must now provide clarity on costs, delivery and payback to promote the case with the financial sector.
The UK has world class engineering and design skills and after a long recession is hungry to deliver new rail-lines, power facilities and airport capacity in a cost-efficient and highly effective way. Recent successes such as the London 2012 Games prove that costs can be contained while value is maximised and I believe that infrastructure programmes are now a solid bet for long term investment.
Lance Taylor, chief executive Rider Levett Bucknall
The spend reduction continues to affect asset renewal and regeneration projects [but the] education spend is a boost. Building Contractors will focus on taking a developer role on housing at lower margins replacing stalled PFI/PPP programmes.
Infrastructure projects will take a minimum of 3 years to enable [and] all in all architects focus on master planning and vertical construction – [so] the decline will continue.
The [future] workload will come from estate rationalisation based on cost reduction and real estate receipts – [so] more with less.
Surinder Mann, Ramboll director
Investment in road and bridges is good but rail and sustainable energy are greener - an area sadly lacking in the statement. However, government seems to have finally woken up to the importance of the real economy; not London and not finance centred, but national and industrial. Not so much a ‘march of the makers’ but one of the builders where infrastructure investment will be amplified as the jobs created cascade spending into the rest of the economy.
Peter Chapman, Cluttons head of rating and compensation
Of course additional help for small businesses is to be welcomed, however the unfortunate truth is that this is too little, too late. The extended business rates relief will no doubt help some small companies weather the economic storm, but whether it will make any significant impact on the UK’s financial state is doubtful. Many of the small businesses which would have benefited from the support earlier are no longer sustainable: this move is simply not enough to save them.
These measures are said to part of a wider aim to improve the financing and taxation environment for small businesses, but encouraging more start-up companies will not stave off a double-dip recession. We also need to ask why larger businesses are being ignored? These, too, drive the economy and are not receiving the support they desperately need.
It is essential that George Osborne recognises and takes the opportunity to abolish the current increase of the uniform business rates linked to the RPI figure and uses the CPI figure instead. Going forward, we would urge the Chancellor to look at the bigger picture and refocus his efforts on those businesses which can help the UK economy grow.
Simon Rubinsohn, RICS chief economist
Today’s figures from the OBR are predictably disappointing and serve to emphasise how desperately the government needs a positive strategy that delivers sustainable growth quickly to the UK economy. The recognition that infrastructure development and the construction industry are the key drivers of this much needed growth is a good start but will only deliver in the medium term. More immediate measures are needed to kick start the economy now.
It is essential that government and investors understand the specialist expertise that small surveying businesses can offer these infrastructure projects. Ensuring that small businesses are able to bid competitively for this work will benefit both the project itself and the wider economy. Efficient, effective and sustainable procurement and delivery, throughout the whole life cycle of the project will also be vital. RICS standards and member expertise are central to this process.
It is sensible to seek to leverage institutional investment in infrastructure and countries such as Canada and Australia are good examples of how this can be done. But care needs to be taken to ensure that investors have the right knowledge and the right vehicles at their disposal to make the right investment decisions for UK Plc. The planning system will also need to adapt to provide the certainty that these investors need.
Paul King, UK Green Building Council chief executive
Buried in the Autumn Report is confirmation that Government is committing £200 million over two years to incentivize take up of the Green Deal. That’s great news and a huge victory for DECC, although we still have to wait until next year for the detail.
However, we’re kidding ourselves if we think George Osborne has seen the light. References to sustainability in the National Infrastructure Plan don’t seem to be part of any kind of overarching strategy. This was an opportunity missed to put green growth and green jobs at the heart of economic recovery.
Imtiaz Farookhi, NHBC chief executive
We welcome the Chancellor’s reaffirmation of the Government’s commitment to the housing market as highlighted in today’s Autumn Statement.
NHBC’s latest registration figures show that house building levels continue to decline and it is crucial that these policies support the delivery of strong growth in the new build sector to help bridge the growing gap between housing supply and demand. We are fully committed to continue to work closely with, and advise, the government to support the industry at this important time.
Murray Rowden, Turner & Townsend managing director of infrastructure
Few will argue with the chancellor’s ambition to overhaul some of the country’s most crucial infrastructure. The section of his speech where he confirmed the list of 35 road and rail schemes singled out for investment was notable for its lack of boos. Investing in infrastructure is an investment in Britain’s future growth, and the right project will generate both wealth and jobs in its own right. Osborne said he has accounted ‘pound for pound’ for all of the £5 billion of public money due to be injected into infrastructure building over the next three years
But if the government is to find the extra funds needed to meet the vast capital cost involved, it will need to perform a twin feat - of both creativity and persuasion. PFI, once the darling of the Labour government, is now the funding model which dare not speak its name. So in its stead the government is proposing to use private pension funds as a source of long-term funding. It’s a logical and tested way of keeping much of the cost off the government’s balance sheet - and getting a significant chunk of the money up front.
And it should be an easy sell too. From the pension funds’ perspective, the right projects can be very appealing - as they provide a long-term, steady income stream and low risk. But the smaller projects will provide a tougher challenge, as investors in these will often want to see quicker returns in return for higher risk. The most likely source of this sort of funding will be a retooled version of PFI. Despite its tarnished image and reputation for hidden cost, the PFI model can be an effective one. Our experience shows that it’s still popular in several other countries - especially Canada.
Successive UK governments have found its ability to allow investment without driving up public debt levels to be irresistible. It will be given a rework and a rebrand of course - perhaps along the lines of the ‘not for profit’ model being mooted by the Scottish government. But if the chancellor is to come close to delivering this ambitious list of infrastructure projects, he cannot count on the pension funds to provide all the investment needed. He will inevitably be seduced, like his predecessors, by the siren song of PFI.
Patrick Twist, Pinsent Masons infrastructure partner
The Chancellor’s announcement on the National Infrastructure Plan has been heavily trailed over the weekend. Let us hope that doesn’t signify that it is more about spin than spades. Infrastructure takes a long time to get started. Having spent eighteen months without a pipeline of new projects government urgently needs to get some projects into a rapid procurement.
Otherwise the announcement will be simply that, an announcement. The rejection of the PFI model means that a new procurement road will be adopted. That doesn’t augur well for speed. Past experience suggests a new model will mean lengthy procurements whilst the real commercial issues are identified and negotiated. Treasury understands all this so no doubt the chancellor will tell us how he is going to ensure that new investments are actually made in the coming months.