What the Industrial Strategy means for infrastructure funding across the UK

The last Budget and the underpinning OBR forecast suggests the UK faces significant challenges. The central threat is stalling productivity growth which is expected to grow at almost half the rate experienced in the 30 years to 2007. The Industrial Strategy (IS) aims to address this challenge and rebalance the economy across regional lines.

The role of physical infrastructure in unlocking growth has been recognised by successive governments but its prominence in the IS is significant. The importance of a functioning transport system, sufficient capacity in our utility networks, the availability of affordable homes and the increasing demands for digital connectivity have long been understood. Insufficient investment in these and other infrastructure systems can act as a brake on the UK’s long-term growth prospects.

I have taken a look at what the government proposals amount to and how local areas should position themselves to ensure they can benefit from infrastructure investment.

The National Strategy

  • A focus on infrastructure: the National Productivity Infrastructure Fund (NPIF), launched in the 2016 Autumn Statement, has been confirmed as one of the main routes through which infrastructure funding will be delivered in the future. The aim of this fund is to target areas critical for productivity growth such as: housing, research and development (R&D) and economic infrastructure. At the last budget, the fund was extended to 2022/23 and the available funding was increased from £23bn to £31bn. The Industrial Strategy confirms that £24bn has been allocated to transport, housing, digital and R&D, leaving almost £7bn to be allocated at a later date.
  • A spatially targeted approach: the government has set out a more strategic approach for the delivery of infrastructure investment. The allocations process for infrastructure funds such as the NPIF will take account of disparities in productivity and opportunity between places to ensure that infrastructure investment (which is typically awarded on a competitive basis) drives growth across all regions of the UK. So far, it is unclear how this funding will target underperforming areas, but it is likely to concentrate on places and infrastructure that can make the greatest contribution to growth and which are best able to tackle the productivity challenge.
  • Links to Existing Provision: it is also important to note that the investments delivered through the Industrial Strategy will build on the significant work that is underway in many parts of the country, such as those funded through Local Growth Fund (LGF) and Growth Deal investments. These are already delivering important local infrastructure that will unlock employment and housing growth and are part of wider programmes of longer term revitalisation which are tied to agreed local strategic priorities.

 A Local Perspective

The additional funding targeted on infrastructure is welcome. Regeneris is already supporting various organisations, including local authorities and LEPs, to make the case for investment which maximises an area’s strategic and economic contribution to growth nationally. We also regularly develop and test new approaches to demonstrate the impact of investments, including wider social factors and drawing on the most recently published government guidance.

There are some clear lessons for organisations looking to fund and support local investment to unlock growth. Below I’ve set out what I believe are the main issues that should be addressed:

  • Your contribution to the national productivity challenge: to secure funding for critical infrastructure projects, it will be more important than ever to identify national impacts. Instead of simply displacing activity from other parts of the country, proposals will need to tackle regional and national constraints to growth. Projects will need to show how they can deliver genuine supply side improvements that enhance the economic capacity of the wider area.
  • A real sense of place:  many different locations will be competing for limited resources and it will be important to demonstrate why you should get the money. Demonstrating the impact of past investments can highlight capacity to deliver genuine economic outcomes. Areas that do not have a track-record will need to transfer lessons from elsewhere to assert your management and commercial credentials.
  • A robust strategic case: that emphasises links between local, regional and national priorities will further strengthen your case. This should draw on the local industrial strategies (LIS) once in place, to demonstrate your proposals are part of a coordinated programme of activity to drive up productivity.
  • Demonstrating impact: a refresh of the HM Treasury Green Book is expected soon and the recently published interim National Infrastructure Assessment highlights that current appraisal approaches are often hard to interpret, opaque and may lead to biases towards particular forms of investment; for example by prioritising transport connections between cities rather than urban transport projects within functional economic areas. The National Infrastructure Commission is interested in better and simpler performance measures for prioritising projects. This is an opportune time to think about how the economic and wider social impacts can most effectively be captured to provide a compelling economic case for investment.

The Industrial Strategy is a positive commitment to infrastructure delivery across the UK. The challenge will be for local partnerships to develop their own local industrial strategies and investment propositions that clearly demonstrates a tangible contribution to national priorities and challenges.


Relevant Projects

SEMLEP Due-Diligence and Project Prioritisation Support: Regeneris is providing independent reviews of LGF and SCF funding applications to SEMLEP to ensure that the applications are sufficiently robust and that capital funding can be delivered in line with the LEP’s Assurance Framework. Projects assessed to date include highways improvements, R&D facilities, further education facilities and infrastructure that will unlock land for housing and employment. For over-subscribed programmes, we have also assisted SEMLEP in the prioritisation of investment programmes, by identifying the extent to which projects align to local and national priorities and identifying a programme that maximises the potential contribution to the LEP’s economic objectives.

D2N2 Value for Money Appraisals: D2N2 wanted expert advice on the value for money offered by investment projects being submitted to its Local Growth Fund. Regeneris has provided impartial advice on the range and scale of impacts proposed for a wide variety of scheme, including road improvements, cycle schemes, public realm enhancements and incubators for new business premises. We have advised the D2N2 board on 30 different investment projects. Our reviews have explored the expected benefits, costs, risks and value of each project. Our advice has helped the D2N2 LEP progress £137 million of its own investment in schemes which will unlock just over £500 million of investment in the local economy.

West London Transport Infrastructure: Regeneris quantified the economic costs of the inadequate orbital road and rail infrastructure in West London for the West London Alliance, and helped to identify the specific infrastructure interventions and investments that would yield the greatest return on the economy. A prioritised list of interventions was identified and this is being used to inform future investments in West London.

Lowestoft Third River Crossing Economic Impact: Suffolk County Council commissioned Regeneris to provide economic evidence to support their plans for a third harbour crossing in the town to ease congestion and open up new economic opportunities for growth. We assessed the impacts that a third crossing could have on regeneration, business growth and job creation. Our findings helped to inform the outline business case for the third harbour crossing and helped to unlock £70 million of capital investment from the Department of Transport (DfT).

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