China and South Korea are likely to stump up much of the £300bn we need to fund National Infrastructure Plan projects
The chancellor didn’t provide many crumbs of comfort for UK construction in last week’s Budget announcement.
To stay on course towards long-term economic recovery, Britain cannot afford to pay for the infrastructure and social housing it needs from the public purse.
Apart from the Budget, the Treasury updated the National Infrastructure Plan, highlighting that just £73.2bn of the £377.1bn pipeline of Britain’s infrastructure to 2020 is funded publically, leaving over £300bn of the pipeline to be financed by private investors or via public-private sources.
Infrastructure, according to the World Economic Forum, is a key pillar of economic growth, prosperity and productivity.
Britain needs to be able to fund and pay for the infrastructure that is desperately needed as it continues to fall further behind (Britain is ranked 28th globally for the overall quality of infrastructure) and sits well outside of the super league of infrastructure nations.
Investment from China and Korea brings with it the real prospect of increased competition for the UK construction sector from China’s state owned enterprises, as well as Korea’s engineering and construction industry
The reality is that Britain’s infrastructure is creaking and increasingly out-dated and out of capacity. Not only is Britain facing a near-term energy crisis, but roads are increasingly congested, a high percentage of Britain’s Victorian water and sewer infrastructure needs modernising and investment in rail capacity needs further boosting by HS2 to provide modern and up to date connectivity across Britain’s transport network.
Meanwhile, only last Sunday, China announced that it would fund and pay for a massive infrastructure programme designed to help a further 100 million of its population join the growing urban population.
Attracting private investment in Britain’s infrastructure is a key to boosting the country’s economic revival and to ensuring it becomes competitive in the race for the economy to become globally interconnected with high growth emerging markets, driving exports.
China has already invested billions in UK real estate and has been eyeing up Britain’s infrastructure projects with offers to help in funding HS2 and other key infrastructure mega projects.
China is not the only nation keen on investing in Britain’s infrastructure. South Korea has also pledged to increase investment in Britain’s infrastructure and is lining up to invest.
Investment from China and Korea brings with it the real prospect of increased competition for the UK construction sector from China’s state owned enterprises, many of whom already operate globally, as well as Korea’s engineering and construction industry.
One glimmer of hope for UK construction is the government’s pledge to increase export guarantees, helping to potentially boost the export of Britain’s world-class construction expertise, mainly helping Britain’s “invisible earnings” and balance sheet.
Graham Robinson is director of Global Construction Perspectives