Out-Law News | 03 Dec 2014 | 9:57 am | 2 min. read
Infrastructure expert Richard Laudy of Pinsent Masons, the law firm behind Out-Law.com, said that the 2014 National Infrastructure Plan (NIP) was evidence of the government's "short-termism approach" on infrastructure. Although the document continued to refer to "institutional investment" as a means of finance, he said that it did not address how this could be encouraged.
"All of the projects listed in the updated NIP 2014 fall within the Spending Round 2013 funding envelope," he said. "The purpose of the NIP is to set out how the money allocated will be spent, to provide the detail. Unfortunately, as a whole document, the NIP 2014 falls short of addressing the financing element."
"Although positive announcements were made around regions, regeneration and skills, the crucial piece of the puzzle was still missing – finance. Ahead of the Autumn Statement it feels like we're just spinning plates to keep things moving and working rather than delivering genuine long-term, economically enhancing infrastructure that will lay the foundations for future growth and prosperity," he said.
The NIP lists the government's 'pipeline' of projects in the energy, transport, flood defence, waste, water and communications sectors, including the 40 major infrastructure projects that are its highest priority. It was last updated in 2013. There are a total of 550 projects and programmes in the updated pipeline with a combined capital value of £413bn. The government allocated £100 billion to capital spending on infrastructure as part of the 2013 Spending Round.
The updated plan contains a commitment to invest £2.3bn in over 1,400 flood defence projects in England over a period of six years, which the government said would prevent over £30bn in damage in the event of future flooding. The Humber Estuary, Oxford Flood Alleviation Scheme and Tonbridge, Yalding and the surrounding communities will be the major beneficiaries of this money, and the government has also committed to spend £15.5 million on flood defences in Somerset over the next six years following severe flooding last winter.
The document also contains a detailed road improvements package worth £15bn, details of which were set out in the 'roads investment strategy' published earlier this week. In the energy sector, the government has committed to "closer discussions" with Tidal Lagoon Power Ltd on the potential for an "affordable and value for money" tidal lagoon project in Swansea Bay. Subject to planning permission, if the decision is taken to progress with the project this could become the first tidal lagoon project in the world, according to the NIP.
According to the updated NIP, 65.6% of the investment needed to deliver the planned projects in the pipeline will need to come from the private sector. Private investment will be needed particularly in the non-regulated sectors of the infrastructure pipeline, while projects in the waste, ports and oil and gas sectors will likely be "almost entirely provided by project developers on balance sheet". In many cases developers will need to investigate the possibility of long-term financing in the form of debt and equity to be repaid from the cash flows generated by the project once operational, to avoid them having to include large capital investments on their balance sheets, the NIP said.
"The document continues to go on about institutional investment, but this is only relevant to existing assets," said infrastructure expert Richard Laudy.
"Foreign investors are prepared to invest in the early stage of projects, where there is significant risk. The harsh reality is that we do not have the money available to build what we need because of our own austerity programme, as we seek to bring down the level of debt. This means we need to look elsewhere for finance, but whilst foreign investors are interested in talking to us, they are put off by perceived delays in our planning and regulatory systems and the absence of 'shovel ready' projects," he said.