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Connectivity / Time to act on infrastructure investment
Today (29 November 2011), the UK Chancellor made his Autumn Statement against a backdrop of tough economic forecasts for the country.
The Office for Budget Responsibility is forecasting growth of just 0.7% in 2012, which comes on the back of a forecast from the OECD (Organisation for Economic Cooperation and Development) suggesting growth will be just 0.5% next year and unemployment will hit 9% in 2013.
No matter how much credence is put in the predictions of economists, it is clear that we face some major challenges in the months and years ahead.
On the plus side, the Chancellor made some very welcome statements on infrastructure spending.
The Chancellor announced £5bn to promote schemes such as road, rail and superfast broadband schemes, along with plans to leverage a further £20bn in spending by making it easier for British pension fund groups to invest in UK plc.
Inevitably, many people will argue over whether this is enough money in the circumstances or whether these are the best schemes to push forward. Equally, some of the more sceptical commentators are already querying whether pension funds are really prepared to take on the risk without cast-iron government guarantees.
Those issues can be debated ad infinitum, however, for me, the Chancellor’s announcement is extremely welcome news for one key reason: it underpins just how important infrastructure investment is to the economic wellbeing of any country.
For that reason alone, it is good to see it back at the top of the UK Government’s economic agenda. According to the World Economic Forum, the UK languishes at 28th in the world rankings for infrastructure. This is not good enough for a country that wants and deserves to position itself as one of the world’s leading economies.
Poor infrastructure puts the country at a disadvantage when it comes to attracting investment and growing the industries the Government needs to rebalance the economy away from the financial service sector in the City.
Small businesses all the way through to major exporters need efficient infrastructure to get their people to work and their products to market.
Of course, there are those who will argue “well, you would say that wouldn’t you?” and to an extent they are right.
However, we are not the only ones saying this – everyone from the Prime Minister and the Chancellor, to the CBI, the IMF and Nobel-prize winning economists like Joe Stiglitz are saying the same thing too.
Infrastructure investment translates quickly and directly into jobs and sustainable growth. With historically low long-term interest rates and a highly competitive construction market, there has rarely been a better time to secure value for money.
It is imperative that we get more infrastructure investment to create jobs and drive sustainable economic growth in the short and longer-term. But it is vital that infrastructure investment remains at the top of the Government’s strategy agenda in the future too. Infrastructure and competitiveness are inextricably linked and that is why a coherent, consistent, long-term and sustainable plan for investment is so important.
The National Infrastructure Plan represents a positive start along that road, but we have some way to go before we see a truly strategic national infrastructure plan that is fully costed and fully funded.
Clearly, no-one expects the Government to abandon its deficit strategy and splurge on new development, but the good news is that infrastructure is firmly back on the agenda – and investment in this area can help boost confidence creating a virtuous cycle of progress.