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‘Perfect storm’ threatens Great Britain’s infrastructure pipeline and economic recovery

‘Perfect storm’ threatens Great Britain’s infrastructure pipeline and economic recovery
  • Total cost of infrastructure projects in Britain set to hit £399 billion by 2026, with inflation adding a further £84 billion 
  • Without drastic action, cost increases could see infrastructure projects cancelled or descoped and economic recovery impeded
  • Containing further cost escalation should be a critical priority for government, local authorities and infrastructure providers

High inflation, recession and supply chain uncertainty are jeopardising key infrastructure projects that are crucial to Britain’s chance at economic recovery, according to a new report published today by leading construction consultant, Currie & Brown.

The 2023 Infrastructure Cost Predictions Report finds that the total cost of Britain’s National Infrastructure Pipeline (NIP) is set to reach £483 billion by 2026, of which £84 billion is the direct result of inflation. Inflation-driven cost increases could amount to the equivalent of an additional £32,000 per minute, or more than £1,250 per person over five years.   

A drastic new approach to infrastructure projects is crucial 

The report highlights that if measures are not taken, cost increases, inefficiencies and wastage – all compounded by inflation – will slow down, limit, or cancel infrastructure projects that are essential for Britain’s economic recovery.

It finds that, within the current recessionary climate, there is no room for cost increases of any kind, and that ‘business as usual’ project and cost management, could put planned infrastructure projects at risk.

Indeed, for every 1% increase in required expenditure resulting from inefficient project and cost management, the cost of delivering the infrastructure pipeline could rise by an additional £1,500 per minute. Therefore, clear and early planning and effective cost management will be essential to ensure projects are not dramatically descoped or scrapped altogether – in turn wasting precious time, resources and taxpayers’ money. 

Risk to economic recovery and the levelling up agenda 

The threat to the infrastructure pipeline has the potential to undermine Britain’s domestic growth ambitions and prospects for foreign trade, as well as putting the Government’s levelling up agenda at risk.

Northern and Central England have promised infrastructure investment of at least £72 billion by 2026, but with spiralling costs and inflation potentially adding £13.4 billion to this figure, the viability of projects going ahead with their original scope is at great risk. This could impact many high-profile planned projects including Northern Powerhouse Rail, Midlands Rail Hub and HS2 Phase 2b.

Nick Gray, Currie & Brown COO UK & Europe, said: “Britain has entered recession and inflation remains a significant threat to the financial health of the country. The Chancellor has prioritised infrastructure as a key lever for driving labour market participation, growth and productivity, and for accelerating the levelling up agenda.

“However, with budgets so tight and such pressure in the wider economic landscape, we must urgently change the way we approach infrastructure investment if projects are to be successfully delivered. A business as usual approach is simply not feasible. We are calling on the government, local authorities and stakeholders to take immediate action. Early and informed decision making will be critical to safeguarding the infrastructure pipeline, and Britain’s economic recovery.”

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BDC 301 February 2023