Budget 2013: Extra cash for infrastructure

Heather Butler

Infrastructure spending is to get a boost of £3bn extra each year from 2015/16 funded by savings in government departments, the Chancellor announced.

This would amount to an additional £18bn in funding by the end of the next parliament according to George Osborne.

No new regional programmes were unveiled in the Budget but the cash should benefit some of the schemes already set for the North West, identified by the National Infrastructure Plan 2011.

An update on the projects outlined in that plan was published alongside the Budget report, including:

  • Mersey Gateway Bridge – construction on track to begin in late 2013 or early 2014; Halton Council has announced the call for final contractors' bids, with the preferred bidder to be announced in June. Final approval remains on track for autumn 2013.
  • Heysham-M6 Link Road – received approval in March, work to begin later this year.
  • Northern rail connectivity – Liverpool-Newcastle including Northern Hub – construction work progresses in readiness for start of Manchester to Scotland electric services in December 2013.
  • Bridge and design works continue on other elements of the investment package – including Ordsall Chord and other phases of North West electrification. Ordsall Chord on schedule for completion by end 2016.
  • Ports, container terminal project – costing £300m and promising 5,000 new jobs, a brand new in-river container port known as Liverpool 2 to be built by 2015. The facility will add half a million containers annually to the Port of Liverpool, taking its capacity toward 2m containers year.
  • Ports, renewable energy project – £150m biomass development at the Port of Liverpool for a biomass import, storage and out-loading to rail facility, to be delivered by private energy firm RES.

Chris Fry, head of infrastructure, building and construction at KPMG in the North West, said: "From an infrastructure perspective today's Budget was disappointing. £3bn infrastructure investment per annum – scraped off other savings – will be welcome but will make little difference in solving the UK's infrastructure challenge.

"Experts estimate that the UK needs at least £400bn investment into our ailing infrastructure over the next 10 years. What is clear is that the UK must now look to private stimulus for infrastructure investment after the Chancellor today turned his back on additional borrowing.

"Around 65% of the UK's infrastructure is already privately financed but we won't unlock new development spend from the private sector without action and a consistent message from the Government, to build confidence amongst developers and investors.

"However, tucked away in the Chancellor's speech was an intriguing reference to UK Guarantee support for "the new power stations of tomorrow".

"This could be a game-changer for new nuclear if the Government is really serious about debt support as well as fixing the strike price."

Jeremy Hartley, managing director at the Eric Wright Group, said: "Having recently completed a number of projects for Network Rail, which is a new venture for our Civil Engineering division, the £3bn a year allocated for infrastructure projects including railways is certainly welcome news. It means that there ought to be plenty of opportunities for further growth in this area, although competition will no doubt be fierce."

Simon Bedford, partner and head of Deloitte Real Estate in the north said: "The Chancellor has found an extra £3bn per annum from departmental budgets to invest in infrastructure from 2015/16. While that is welcome, the challenge remains for the Government to translate this pledge into reality.

"Today's commitment needs to be backed up by action and delivery. The fact remains that the construction sector has contracted in each month since October last year and new orders are down by nearly 40 per cent from their peak in 2007. This is despite many announcements and initiatives that have not been able to arrest this decline.

"If infrastructure is to be the silver bullet for economic recovery, we need to see shovels hitting the ground on projects that have a real impact in driving growth sooner rather than later.

"The development of northern infrastructure and the growth of integral developments such as Manchester's Metrolink network and port developments at Liverpool Waters is essential if the region is to be able to compete on a national scale. We're hopeful that the pledged funds will support vital schemes such as these and will be used to ensure that the HS2 developments stay on track north of Birmingham to benefit existing businesses in the North West and North East and encourage new interest from foreign investors."

Mark Bourgeois, managing director of shopping centres for Capital & Regional which owns The Mall in Blackburn, wanted to hear more from the Chancellor on support for retail development: "Town centres across the UK are crying out for investment – the simple fact is that without it, they will not recover. Our immediate reaction is that the Chancellor's announcement to increase infrastructure spending is a step in the right direction and will hopefully encourage development in our town centres, however the devil is in the detail and it will be cautiously welcomed by a retail industry that is questioning just how the Government will allocate this investment to the places it is needed most."

Peter Vinden, managing director of construction advisory firm, The Vinden Partnership, worries the cash may come too late: "The construction sector is still suffering the effects of the recession and while the Government has pledged an additional £3bn for infrastructure projects, there may be no companies left to carry out the work planned for the region by the time the money materialises.

"The Government needs to step up and support construction companies that are struggling with cash flow. Grants are available for start up businesses and entrepreneurs, there are enterprise zones such as Manchester's Airport City where those that can afford to move office are treated to discounted business rates and supported with technology provision such as superfast broadband, yet the established family firms with 80 years of solid performance behind them are being left to fail because their invoices go unpaid.

"Mr Osborne should have announced a package of low interest loans and grants that are available to established businesses that are falling victim to non-payment. This would safeguard the employment of thousands of tax-paying people across the region which has got to be more profitable than allowing them to be made redundant and hoping they choose to go it alone."

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