This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
Summary
The Chancellor of the Exchequer, Philip Hammond, has today announced a new National Productivity Investment Fund of over £23bn to invest in transport, digital communications, research and development (R&D), and housing, between 2017-18 and 2021-22.
The Chancellor has shifted focus from larger infrastructure projects to delivering a number of modest rapidly deliverable investments to provide short-term economic stimulus. In the backdrop of Brexit uncertainty, this could be viewed as a welcome boost to a slowing UK economy, but one must question if the Chancellor's measures on UK Infrastructure will go far enough. It is also uncertain as to how much of this £23bn is actually "new", meaning as opposed to a recycling of previous announcements.
Increased capital investment for transport
The Chancellor announced a £1bn+ commitment to extra investment in English transport projects. This investment translated to the following spending commitments:
- £1.1bn going towards relieving congestion local roads and public transport networks;
- £220m to tackle key-pinch points on strategic roads;
- £27m in development funding specifically for an ‘expressway’ to connect Oxford, Milton Keynes and Cambridge;
- £5m in development funding for the Midlands Rail Hub, a programme of rail upgrades in and around central Birmingham;
- To bring forward £100m to accelerate construction of the East-West Rail line western section and allocate £10m in development funding for the central rail section.
Housing Investment
A Housing White Paper will be published "in due course", however the Chancellor confirmed:
- a new £2.3bn Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in high demand areas;
- £1.4bn will be made available to deliver 40,000 additional affordable homes;
- The government will double the annual capital spending on housing.
Digital Infrastructure
The Chancellor committed to spend more than £1bn for digital infrastructure, and 100% business rates relief on new fibre infrastructure.
Devolution and local government
The Chancellor confirmed that "Devolution remains at the heart of this Government's commitment to local growth". He announced that he will fund investment in the Midlands and a major road scheme in the North. Specific commitments were:
- £7.6m for repairs to Wentworth Woodhouse, near Rotherham, said to be inspiration for Pemberley in Jane Austen's Pride and Prejudice;
- £1.8bn from Local Growth Fund to English regions;
- Greater London Authority to receive £3.15bn to deliver 90,000 housing starts by 2020-21.
What does this mean for UK infrastructure?
Research by the Civil Engineering Contractors Association has concluded that each new job created in infrastructure construction creates three jobs for the wider economy, and that in the long-term every £1 invested in infrastructure construction raises economic activity by £2.84. Given that long-term borrowing rates for the Government are the lowest they have ever been, some quarters may be disappointed that the Chancellor has not committed to greater capital spending on UK Infrastructure projects to help boost the UK economy.
However, it is fair to say that the Chancellor's hands were somewhat tied. The UK economy is forecast to be £122bn worse off by 2020 than was forecast in April, almost half of which the Office of Budget Responsibility attributes to June's Brexit vote, so it is fair to say that he probably doesn’t have much to play with. Buckle up, it’s going to be a bumpy ride.
