Three takeaways from the UK’s ‘infra budget’

The 2020 Budget is one of the UK’s largest capital investment programmes ever, which will draw plenty of intrigue from infrastructure investors.

It was billed as the ‘Infrastructure Budget’ in its lead-up, but it was the ongoing coronavirus crisis – now officially a pandemic – which took centre stage in the UK’s Budget 2020 yesterday.

So much so, the long-awaited National Infrastructure Strategy, which was due to form a core part of the Budget, will be released later in the spring, according to the government. However, chancellor Rishi Sunak, only a few weeks into the job after the sudden resignation of his predecessor, Sajid Javid, still had plenty to say on the matter. Javid had promised an “infrastructure revolution”, and the £600 billion ($767 billion; €680.3 billion) of pledges certainly points in that direction.

‘We don’t do partnerships anymore’

“There’s one more road I want to mention,” Sunak said, somewhat echoing Steve Jobs’ famous “one last thing” at Apple product announcements, after unveiling a wealth of coronavirus-related emergency funds. “It’s one of our most important regional arteries. It is one of those totemic projects symbolising delay and obstruction. Governments have been trying to fix it since the 1980s. Every year, millions of cars crawl along it in traffic, ruining the backdrop to one of our most important historic landmarks. To the many right-honourable members who have campaigned for this moment, I say this: The A303 – this government’s going to get it done.”

He was referring, of course, to the A303 Stonehenge tunnel, a £1.3 billion project slated, for many years, to be delivered as a public-private partnership. Although the chancellor didn’t mention how it was going to be delivered, a Treasury spokeswoman poured cold water on any hopes for private capital participation with a curt: “We don’t do partnerships anymore”.

That could be a sign of things to come for the government’s £27 billion roads investment programme.

CCS, take two

Sunak dedicated one of the sections of his budget to green growth. It remains to be seen ­– especially in light of the recent Court of Appeal ruling on Heathrow Airport – how his promise to invest £27 billion in improving Britain’s roads fits into this. However, there was a big pledge on carbon capture and storage, promising £800 million to establish two or more new carbon capture and storage clusters by 2030.

“CCS is precisely the kind of exciting technology where Britain can lead the world over the next decade,” Sunak said.

The move is encouraging as Britain heads towards net zero by 2050. Unfortunately, we’ve been here before.

Former prime minister David Cameron championed CCS technology early on in his tenure, launching a £1 billion competition which saw major energy players Shell, SSE and Drax develop projects, only for this to be cancelled in 2015 mid-way through as part of a slew of cuts to the renewables sector.

The energy sector, the world’s climate situation and Britain’s own legislation needs Boris Johnson and Sunak to not walk in the shoes of their predecessors.

Crowding in or crowding out?

With the UK home to one of the worst fibre-to-the-home penetration rates in Europe, something has to be done about broadband. The opposition Labour Party had suggested in its election campaign last year that it would make broadband free for everyone. This government has pledged a different solution.

According to Sunak, some £5 billion will be spent supporting the roll-out of “gigabit-capable broadband in the most difficult to reach 20 percent of the country”. There will be plenty in the private sector who will be keen to see what type of support this will form.

The sector has been the subject of widespread interest from infrastructure investors, with the likes of Macquarie, Infracapital and Aviva Investors all able to point to investments in rural and hard-to-reach areas. They and the rest of the industry will be keen to see whether this new iteration of a Conservative government will use this multi-billion support to crowd in more investment from such players or whether it will plug Britain in on its own terms.

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