Why UK Infrastructure Costs So Much: What Government and Business Need to Change

Now, of course, there's a big political argument that you very often hear, we need to spend more on infrastructure.

Now, that might be right, but it's not just about spending more.

And, John, you've already touched on this, this point about volatility, that sometimes we go from feast to famine, and that has some real downsides in terms of getting value for money.

What would you sort of particularly follow from that?

I mean, I think that's right.

On average in fiscal consolidations in the last two or three decades, we cut capital spending by 20% in the public sector.

I think in the late 2010s, we had five spending reviews over eight years and four of those decided they would start from scratch and do a zero budget approach to capital.

It's quite questionable to use our infrastructure policy to fine-tune our fiscal policy, it seems to me, because it has some big consequences.

The first is, every time you pause a project, you delay it or you re-scope it, it drives up costs.

Typically, the project team continues and ramps up costs every month, and construction industry inflation continues to increase the cost of it.

So pausing increases the costs of projects.

The second thing is when you turn the taps on and you try and spend money, you really struggle.

I mean, over the last few years when capital budgets have increased, the UK government's only spent £5 in every £6 that it wanted to.

And Germany recently, which used to have a huge increase in infrastructure investment, is only actually spending 75% of what it wanted.

So stock doesn't work, but stock doesn't work either.

More fundamentally, I think it affects the credibility of the UK economy to invest in.

That if you're a private sector organisation, how can you commit to investing the skills and the capacity and the technology in developing your supply chains if you don't have a consistent pipeline of business to work on? So, for example, while Boris Johnson announced 40 major new hospitals were going to be built, We couldn't because he didn't allocate a budget.

But if he had, figures in the industry said, well, we couldn't have built them anyway.

We haven't done a major hospital development for 10 years.

We don't have a sector anymore.

It needs to be built.

I think what's really important is we develop a stable pipeline because it allows that expertise, whether it's firms, whether it's individuals, whether it's technology, to move from project to project, learning from each project as we go along and giving people the confidence to invest.

Having said all that, it's not just off-start.

We underspend other countries by quite a margin.

Less so in the public sector, interestingly, than in the private sector, where we've got consistently the lowest investment to GDP share of any country in the world's top seven performing economies.