Infrastructure should lead post-Brexit revival

Chris Pike, development director for infrastructure at Arcadis, says now is not the time for dithering on national projects if we are to build a new relationship with the world outside the EU.

Chris Pike

While the long-term impact of Brexit is still unclear, its short-term impact is already being felt. Financial markets dislike uncertainty and the shock of the referendum result – together with the resulting political turmoil and downgrading of the UK’s credit rating – has hit investor confidence hard. The impact on our industry is already being felt, with construction activity at a seven-year low.

All this is happening against a backdrop of the ongoing question of runway capacity in the south east, HS2 having to reinforce its business case, and the Shaw Report pointing the way to significant changes in the structure of the rail industry, which the Office of Rail and Road will start consultation on shortly.

In the energy sector, the government’s eleventh-hour decision to delay final approval for the UK’s first nuclear power station for a generation at Hinkley Point, despite securing critical foreign investment not 24 hours before, is significant.

This apparent government indecisiveness around our critical infrastructure projects risks fundamentally damaging appetite to invest in UK infrastructure. Recent headlines that cast doubt over the future of other key infrastructure projects such as HS2 and Crossrail 2, as well as new delays on the decision on runway capacity in the south east, suggest a dangerous pattern is starting to form.

The resultant damage to investor confidence will likely serve to push our country further towards the prospect of a damaging and costly recession. 

Making the nation more stable and prosperous

The nation’s infrastructure priorities have not changed since the Brexit vote. The same problems around mobility, capacity, growth and economic productivity persist regardless.

History shows us that investment in infrastructure has always been a vital driver of growth, and it has also proven to be a positive intervention during turbulent times.

While new projects cost money, delays in decision-making cost even more. Even a six-month postponement can create significantly longer delays and substantial additional costs.

At the same time, major projects’ ability to restore confidence and generate long-term returns should not be overlooked, provided a coherent strategy of how they relate to one another and the purpose they serve.

This does not mean we should push ahead without proper planning or due process, but making strong commitments is powerful and symbolic.

Now is not the time to batten down the hatches. We simply cannot afford for the uncertainty created by Brexit to delay the critical infrastructure projects that our country needs. Strong investment and bold decisions that support our ability to trade globally and leverage prosperity across the country are the solution. Every day lost in making these decisions is a day that costs and introduces potential risks.

Airport capacity expansion and High Speed 2 are the two infrastructure priorities that government simply cannot afford to lose time on. And, irrespective of Brexit, London’s population will continue to grow, which means it is vital that Crossrail 2 is also prioritised alongside building aviation capacity in the south east to enable our capital to remain strong and competitive outside of the EU.

Aviation is the gateway to global markets

In the aftermath of the referendum, we could potentially see several major airlines reassess whether the UK remains an attractive base, particularly if more runway capacity is out of reach compared with hubs within the EU.

In spite of this, the decision on an additional runway for the south east was delayed almost immediately following George Osborne’s declaration that the UK remains “open for business” in the days following the referendum. Ryanair has already signalled it plans to grow its operations at EU airports, moving this away from the UK in the wake of the EU vote, and there is a risk that other carriers may follow.

Any runway will take a minimum of nine years to plan and build. Therefore, delaying a decision until late-2016 or even into 2017 could prove a deciding factor when carriers reassess their European hubs – a decision you might expect them to consider in the near future. Ambivalence is, therefore, not an option.

The arguments around whether we need to build at Heathrow or Gatwick must stop. From a long-term perspective we need both. Gatwick is easier to achieve so the smart choice would be to build this first and open a runway during 2025. Heathrow is rather more difficult both from an infrastructure and planning perspective and will take longer to achieve. The decision to build Gatwick first would, therefore, allow more time to bring Heathrow on stream as a part of a much longer term UK-wide aviation strategy.

Creating further aviation capacity in the south east in the long term should also be considered, rather than waiting for capacity to run out before we commit to the long process of planning new runways.

From now on, the UK will need to rely heavily on its heritage in international trading, not just with the EU. On this basis, the expansion of regional airports in the north will be equally important as building capacity in the south. Plus, providing reliable, high speed rail links between our key airports would create access between international markets and the whole of the UK.

This approach would provide prosperity on a national level but could also help rebalance the strong regional divides exposed by the referendum itself.

Rail as the arteries of prosperity and growth

The government must safeguard and prioritise HS2. This ambitious project has huge potential to act as a catalyst for growth across the country at a time when we need it most. Government must also send a clear signal that it will build the full Phase 2 route or extend Phase 1 to Manchester with an east-west HS3 route that will provide critical supporting infrastructure to underpin the Northern Powerhouse agenda.

Interestingly, the devolution of powers from Westminster may well prove to have been timely, enabling our cities to build more quickly upon these national infrastructure investments. This could be important for initiating the desired growth in the midlands and across the north of England, supported by the recent formation of Transport for the North.

HS2 will already connect to Birmingham International Airport and Manchester Airport so it would logically follow that the option of connecting HS2 to Heathrow via Old Oak Common would complete a strong network of airports and high speed rail links.

Equally, prioritising the upgrade of Brighton Mainline, potentially with an earlier introduction of the European Train Control System as part of the Digital Railway programme, would provide vital capacity for commuters, improving and strengthening the link between Gatwick and Central London. This is the only challenge around the new runway plans at Gatwick which, in themselves, are self-funded.

Furthermore, in the capital, linking Victoria with Euston and HS2 by pressing ahead with Crossrail 2 would open up new opportunities for regional connectivity and improve mobility within and into London from key areas of new housing.

We can also maximise the potential around aviation and high speed rail hubs. These node points – particularly the HS2 stations at Euston, Old Oak Common, Birmingham International and Birmingham Curzon Street, as well as the Phase 2 stations, and at our key airports – offer great opportunities for investment, regeneration and growth.

Developing commercial, retail and innovation hubs at these locations fuelling the fantastic entrepreneurial spirit we have in the UK would add significant value to our economy. In particular, learning from key growth economies, by coalescing research and development around these hubs where they are linked to global markets, will open up and extend trading and growth opportunities.

We need to raise our ambitions for these hubs using private finance to support their creation and use them as wealth creators to attract significant inward investment in the future. 

Time to push the button on infrastructure

The time for talking is over. If “Brexit does mean Brexit” we must show we are creating the national infrastructure that will support the UK in reaching out to global trading markets. In turn, this will help drive the investment that these and future critical programmes will require, fostering longer-term growth, prosperity and opportunities for all, as well as resetting the balance between government and private investment, and healing regional divides.

Now is not the time for indecision. The nation cannot afford unnecessary delays to our critical infrastructure projects that will help us to emerge from Brexit strong and prosperous and mitigate shorter term economic effects as we trigger Article 50 and untangle ourselves from the EU.

Now is the time for government to reaffirm its commitment to these major infrastructure projects and make some key decisions that would be received positively by financial markets. The prime minster, who has already shown that she is a bold and ambitious leader, together with her new government, must seize the opportunity and should not lose any more time in making these key decisions.

By slowing austerity and investing in infrastructure, that would support our new position in the global economy, it would show the world that Britain really is “open for business”.