Report: Major UK infrastructure projects 'under threat'

A new report predicts that a brief revival in the UK construction sector will be swiftly reversed by the coalition government’s austerity measures. It says that ‘many major infrastructure projects’ could be threatened and that the construction sector is likely to see a contraction for 2010 as a whole.

The UK construction sector has started to grow again after a two-year recession, with April this year showing the fastest pace of growth since September 2007. However, a new “United Kingdom Infrastructure Report” from intelligence firm Business Monitor International (BMI) predicts that austerity measures being introduced by the Conservative/Liberal Democrat coalition, which came to power in May, will result in a contraction for the year as a whole.

BMI says it is “pessimistic” about the impact that the new government will have on the construction and infrastructure sectors and calls on it to be “more careful in its deficit reduction measures if it is to avoid jeopardising a sustained recovery”. It adds that “many major infrastructure projects” could be threatened.

In early July, the government announced it was scrapping the £55 billion (€66 billion; $83 billion) Building Schools for the Future programme, which was started by the previous Labour government in 2004. The decision meant the cancellation of 715 school refurbishment projects, with 706 to proceed where contracts had been completed or they had reached financial close.  

BMI forecasts that the UK construction sector will be worth £72.6 billion in 2010, and says it does not expect a return to growth until 2012 at the earliest. It predicts the sector will be worth £80.6 billion in 2014, representing a compounded annual growth rate (CAGR) of 0.11 percent for the construction sector as a whole for the 2011 to 2014 period. This compares with BMI’s previous forecast of 4.9 percent growth.

It predicts that the CAGR for UK infrastructure will be 0.6 percent between 2010 and 2014, compared with a previous BMI forecast of 6.3 percent.

To explain infrastructure's slight outperformance of the construction sector as a whole, the report points to projects likely to still go through “albeit at a much more sluggish pace”. These include: the £16 billion Crossrail project, providing better rail links between London and commuter belts east and west of the city; new high-speed rail links between London, Birmingham, the north of England and Scotland; and the revamp of the nuclear estate.

The report also notes that the UK has become the leading player in the offshore wind sector as it seeks to fill shortfalls in electricity generation expected to hit the country from 2017.