Ever since the news of the referendum result broke, there was been panic and confusion over what will happen to our economy and the political fallout from such a momentous decision. Back in December of last year, when we were discussing the Northern Powerhouse at our Construction Roundtable, it was noted that good planning and investment in infrastructure was crucial if the Northern Powerhouse was to be a success. Post-Brexit, many are arguing that supporting infrastructure is more important than ever.
In July of this year, the Institution of Civil Engineers released a report making a case for infrastructure ahead of Brexit negotiations. They came to the same conclusion as our roundtable attendees, that high quality, high performing infrastructure is vital for economic growth and improved quality of life.
For every pound of infrastructure spending, economic activity is raised by £2.84, with the construction industry contributing a huge £103bn in economic output, 6.5% of the UK total.
ICE, The Case for Infrastructure
The report argues that during uncertain or volatile economic times, “continued investment in UK infrastructure can help provide economic stability, facilitate inward investment and drive economic growth.” However, so far we’ve seen a number of such projects stall.
The Projects Without a Kick-start
It’s no secret that the referendum result came as a shock, and arguably many projects were relying on a ‘Remain’ result in order to, either get the kick-start they needed or continue their work based on pre-referendum projections.
Infrastructure projects – such as the planned third runway at Heathrow – were to play a key role in not just resolving Britain’s transport capacity problems, but also to make visiting our fair isle more attractive. Financial uncertainty has been cited as the cause for delays on the runway project as well as HS2, with ‘security concerns’ cited as a reason to stall Hinkley Point, much to the concern of the Chinese investors. On one hand, it makes sense to divert money and support the banks, restoring confidence in the economy by reassuring foreign traders – but perhaps this is a short-sighted solution?
Fighting the Battle Closer to Home
A country’s economic strength can be measured by the growth and resilience of its infrastructure. By focusing on tangible projects which generate foreign investment, create new jobs, and improve Britain’s attractiveness to the rest of the world, the government can support the economy’s recovery (without pumping endless amounts of money into banks), whilst giving the people the confidence they need in uncertain times.
It’s not just short-term economic stability that’s at risk if we choose not to focus on infrastructure. Failure to complete projects such as a new South East runway could see the UK lose out on up to £30 billion in trade by 2030 – with the majority going to France and Germany.
Speaking at the Infrastructure Forum’s Policy Summit, CBI President Paul Dreschler cited the above stats and showed his support for a plan that stimulates the economy through investment in infrastructure.
We need a government that gets on with making the big decisions at home. That means keeping existing infrastructure decisions on track. From housing, to devolution plans through Local Enterprise Partnerships. This show must go on.
Paul Dreschler CBE, CBI President
Dreschler understands that the rest of the world simply won’t wait for us. We must make smart, lasting decisions on the future of our infrastructure now if we’re ever to make a quick economic recovery.
Addressing the Uncertainty
Thankfully, there are voices in government who agree that infrastructure should be a priority in light of Brexit. Responding to fears over scrapping the third runway, transport secretary Patrick McLoughlin made it clear that the project could still be very much on the cards.
McLoughlin further insisted that investing in British infrastructure has become an even higher priority in the wake of the referendum, and scrapping projects such as HS2 would be more reactive to the short-term than being well-thought-out long-term plans.
Even before the referendum, credit rating agency S&P Global Ratings revealed industry research which indicated that infrastructure investment could be affected for a minimum of at least two years following a Brexit result. As the world continues to develop around us and we struggle to maintain momentum and confidence, we’ll have to wait and see how accurate this prediction is and whether we can counteract it. One thing is for certain, only by addressing the uncertainty in our infrastructure can we create a solid future outside of the EU.
Download the full ICE report referenced here.
Our whitepaper discussing the Northern Powerhouse can be downloaded here.
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