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Institution of Civil Engineers

08 Sep 2011 09:09:20

Second National Infrastructure Plan is opportunity not to be missed, says ICE

8 September 2011: The imminent second edition of the National Infrastructure Plan (NIP 2), must map out how to stimulate £200bn private investment in UK transport and energy networks if infrastructure is to deliver as a key strand in the strategy for growth, according to the Institution of Civil Engineers (ICE).

The first NIP, published in October 2010, acknowledged that a step change is needed in the level of investment in UK infrastructure, to secure our future energy supply, mitigate and adapt to the impacts of climate change and drive forward economic growth. The NIP came with a promise of a second, more detailed plan to be published this autumn, setting out how this could be achieved.

In a report published today, ICE says some important steps have been made to encourage private investment, such as the creation of the Green Investment Bank and a fast track planning approval process for nationally significant infrastructure projects. But the leading engineering body says NIP 2 will be pivotal in showing Government's commitment to infrastructure being a core economic driver and urges Government not to waste the opportunity.

ICE director general, Tom Foulkes, said: "Government has rightly identified encouraging greater investment in infrastructure as a priority for the second phase of its growth review, but it is now time to put some weight behind that. NIP 2 must set out clear steps to attracting the huge volumes of investment required in infrastructure and map out how it will create a political, regulatory and commercial environment that is conducive to achieving that.

Foulkes continued: "It is vital that we get this right – NIP 2 must not be a long list of possible publicly funded infrastructure projects stretching into the far future or a cross Whitehall compendium of initiatives. It must be a tightly focussed plan of action, delivering the much needed clarity and direction to investors, asset owners and the infrastructure supply chain. NIP 2 presents an opportunity that cannot be missed."

In its report ICE calls for NIP 2 to be focussed on four overarching objectives:

1. Creating a credible pipeline. It is vital that NIP 2 meets the commitment in NIP 1 to produce and maintain a two year pipeline of approved public sector and regulated utility infrastructure projects. Amongst other benefits pipeline visibility will incentivise the civil engineering supply chain to make strategic investments in skills and innovation, allow clients and suppliers to enter into long term purchase agreements and allow government and the industry to identify the bulges of work that have in the past caused high levels of inflation in the sector.

2. Maximising the social, economic and environmental benefits delivered by UK economic infrastructure. To deliver a coherent plan the two year pipeline should be complemented by a longer term assessment of need based on clear performance requirements for the national infrastructure. To operationalise this plan government must establish mechanisms to allow IUK to take a strategic system wide role in the development and management of our major networks. This should include procedures for prioritising public sector investment on a system wide basis.

3. Improving fundability. NIP 1 argued that 70% or more of the £200bn investment required in the period to 2015 should come from the private sector – at a time when there is fierce global competition for such funds. In many areas this will require government to explicitly take on the role of project facilitator. In addition to managing down political risk, government will need to work with the private sector to identify attractive funding mechanisms, find ways for investors to benefit from economic growth generated by infrastructure and acknowledge the areas where at present risks are too great and public funding remains the most viable option.

4. Making NIP commitments credible in the medium to long term. NIP 2 should also set out how government intends to improve the credibility of these commitments. A major task is to reduce the political risk that has become far too closely associated with infrastructure development.

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