Infrastructure pipeline – the first step in implementing the 10 Year Infrastructure Strategy

• The infrastructure and construction pipeline, published online today, provides a forward look at infrastructure opportunities over the next decade, covering projects from early stages of development through to construction.  
  
• While the first version of the pipeline has gaps and limitations, it represents an improvement on what government has published before, which provided limited visibility on planned investments.
  
• This first step towards a 10 year pipeline focuses on public infrastructure projects and programmes, alongside projects led by regulated private sector providers in the energy and water sectors. The pipeline contains around 780 project/programme entries and will be regularly updated and expanded over time. 
  
• The pipeline is primarily a tool to support the UK’s construction sector which has been involved in its design. The rationale is that more reliable demand signals will enable construction firms to plan and invest in the skills, technology and capacity to lift sector productivity, enabling faster and cheaper delivery of infrastructure. 
  
• The pipeline’s impact will be determined by the accuracy and credibility of the information it provides and by government’s willingness to stick to it.  
  
• While having sight of a project pipeline will be of value to infrastructure investors looking at the UK vs. other markets, what matters most for attracting private capital is whether the opportunities are investible.

What the pipeline covers and why

The infrastructure pipeline represents a post-Spending Review snapshot, focusing on public infrastructure and construction projects and programmes being progressed and planned over a ten-year period[1], alongside projects being led by regulated private sector providers in the energy and water sectors. The pipeline has an interactive dashboard that allows you to filter projects by criteria (e.g. sector/sub-sector and scheme status) and includes a map that presents spend and projects by region. High-level information is provided on listed projects, including anticipated cost, funding source, procurement stage and expected completion. 

As I wrote in a previous post, a key question remains as to whether the government’s ambition for the 10 Year Infrastructure strategy aligns with the capacity of the construction sector to meet the big uplift in demand. Productivity in the sector has flatlined in recent years, with the lack of a long-term infrastructure strategy and stable investment programme identified as root causes[2]. The rationale behind creating a reliable pipeline is to provide the construction sector with the confidence to plan and invest in the necessary skills, technology, and market capacity to lift sector-wide productivity, enabling faster and cheaper delivery of infrastructure. But businesses must be confident that approved projects will be funded and actually happen. This is why government also setting an aspirational 10 year budget for infrastructure spending (of at least £725 billion) is important.

Realistically, a pipeline cannot provide absolute certainty on future business. Things will inevitably change – some projects will not get final approval and the timelines on others may shift. But, critically, the size and shape of the pipeline must hold for the long-term if it is to have the desired market-shaping effects and support delivery of the infrastructure strategy.

What the pipeline doesn't cover

The information published today is the first step towards creating a 10 year pipeline. While it represents an improvement on what has been published before, the first version of the pipeline naturally has data gaps and limitations, which will need to be addressed in future iterations.

Gaps exist on the public projects side where the recent Spending Review settlement has not yet been allocated in deparments or where further business planning is required to confirm key project details. More granular information at scheme level would also aid supply chain planning. Critically, the pipeline reflects public sector spending worth around £290 billion (in cash terms) over the next 10 years or c.40 per cent of the infrastructure budget. While this partly reflects that it is too soon to know now everything that government will be investing in come 2035, the size of the gap means that the pipeline does not yet fully align with the 10 Year Infrastructure Strategy. 

There are also some types of project that do not feature heavily in the first version of the pipeline, including: (i) publicly funded projects led by the Mayoral Strategic Authorities, (ii) public private partnerships for the Lower Thames Crossing and Euston station development as part of HS2, because these are still under development, and (iii) purely private sector projects in areas such as energy generation and airport/port expansion.

What the pipeline will and won't cover in the future

NISTA will expand and develop the pipeline over time, taking account of user feedback. New projects and updates will be added regularly (initially at least every six months) to build a more comprehensive and up-to-date picture of the UK’s infrastructure pipeline.

It is government’s ambition to develop the pipeline so it will include investible infrastructure opportunities that are ready for private investment. This visibility will help the Office for Investment (OfI) to promote such opportunities to investors. However, it will only make sense to add projects like LTC and Euston station to the pipeline once decisions have been made about project structure and the commercial models that will apply. And the government plans to include more local projects in future versions of the pipeline, with an expanded role for the National Wealth Fund in providing early-stage support to help city regions build investment pipelines.

What future versions of the infrastructure pipeline need not be is all-encompassing. Investors are good at originating projects and/or investing in companies that do so. And in a competitive market, there will naturally be limits on the willingness of developers and investors to publicly share the details of projects that are in development. While having sight of a reasonably comprehensive project pipeline will be of value to investors looking at the UK vs. other markets, what matters most for attracting private capital is whether opportunities are investible. Investment opportunities should be paired with specific investment models that support appropriate risk allocation, delivery responsibilities and investor returns, while delivering value for money for the taxpayer.

Overall, investor confidence across UK infrastructure will be determined by government providing strategic clarity and policy stability, having economic regulation that supports fair, stable returns over a reasonable timeframe, and reforming the consenting regime so that project delivery is de-risked. It is this investment ‘golden thread’ that will make the UK an attractive destination amid strong global competition for capital.

The government will want to engage with infrastructure investors, operators and construction companies as it develops the pipeline and accompanying financing models. With extensive experience in shaping policy and commercial decisions across infrastructure sectors, Flint can support you as you engage with the 10 Year Infrastructure Strategy.

This blog was written by Partner James Heath. James supports clients across a range of policy issues with a focus on infrastructure. He is based in London.

Prior to Flint, James was Chief Executive of the UK’s National Infrastructure Commission (NIC). The NIC (an executive agency of HM Treasury) advised the UK government on strategy and policy for economic infrastructure: transport, energy, digital communications, water and wastewater, flood defences and waste.

To further discuss the analysis of this blog or any questions, contact us here.