The importance of infrastructure to business growth in the UK

The importance of infrastructure to business growth in the UK

This month we consider recent research by the Confederation of British Industry, which has highlighted the importance of infrastructure to business growth in the UK.

Is infrastructure the key to the growth of UK business?

The third annual Confederation of British Industry (CBI) survey of over 500 business leaders has highlighted the importance of infrastructure to business growth in the UK. James Snape, partner in the projects team at Nabarro, looks at the opportunities for British businesses.

Click here to read the CBI report.

Background: The UK has become a more attractive place to invest in infrastructure since 2011 compared to other EU member states, according to the third annual CBI/KPMG infrastructure survey. However, infrastructure companies still rate Australasia and North America as better destinations. The report based on a survey of businesses of all sizes and industries, carried out in May to July 2013, looked at areas including digital infrastructure where the UK is seen as having a competitive lead and transport and energy infrastructure where it is felt to be internationally below average.

What are the most important results of the survey?

I think, overall, there are many positives to take away from this survey. It is heartening to see that the UK is still a good place to do business despite the lack of government support for many infrastructure projects. The survey highlights that having a plan for new infrastructure is positive and that there are some potentially exciting projects in the pipeline, albeit few are likely to be delivered in the remaining 18 months of this Parliament. What we need more detail on is how and when these projects are going to be delivered so businesses can plan growth accordingly.

What does this tell us about the role of infrastructure in the growth/long-term viability of the UK economy?

It’s no secret that UK industry has been arguing for some time that our rail, road and aviation infrastructure is key to growth and maintaining the UK’s position as an important European centre. However, the survey goes further in its explicit recognition that it is the job of government to enable infrastructure. Speed of delivery is too slow and should not be left to the private sector.

Why has the government sometimes been slow to support infrastructure development in the UK?

The problem with big infrastructure projects is that they extend far beyond a four to five-year election cycle. The incumbent government deals with the often strong local opposition to schemes, while the preceding administration enjoys the benefits of the project once it’s been delivered. In some respects what we have lacked is cross-party support for major projects (eg Heathrow Airport expansion, HS2). Unless full political backing is secured (for example, as there was for the Channel Tunnel) then some of these ventures become political footballs when they shouldn’t be political at all.

Is the survey good or bad for British business?

There are interesting messages coming out of the report in terms of the impact infrastructure could have on regional regeneration. It is clear there are different drivers for different parts of the UK. Do high-speed rail links or road improvement initiatives bring economic regeneration to areas or do they simply free people to commute quicker to the south east?

What opportunities are there for British business to take advantage of?

The government needs to ensure that British businesses get their fair share of this work, particularly as it is likely that British businesses are increasingly going to be asked to pay a significant contribution to these projects (ie Crossrail is being partially funded by increased business rates in London). Should a British business secure a large, high profile project, it also provides a great opportunity to export its expertise and experience to the rest of the world. The government and UK Trade & Industry should support business in doing this.

How can businesses engage effectively in this area?

Businesses ultimately need a seat at the table of the agencies delivering the infrastructure. In relation to roads, for example, the Department for Transport is looking to set up an arms’ length company responsible for delivering some of the road improvements/new road schemes promised over the next few years.

Is there anything that lawyers should be doing as a result of this survey or should be particularly mindful of?

There will be plenty of work for lawyers representing both supporters and opponents of major infrastructure projects such as HS2. For those organisations entering the UK market to bid for any of these projects, it will be important to highlight the need for local engagement with the public. There are many potential pitfalls as opponents of a scheme will use planning laws and the courts system to delay and frustrate development. And vice versa—if you are opposing a project, there are plenty of legal grounds and ways to challenge or delay the project through the planning system.

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