UK: £13bn of bankable roads left unfunded

There are almost £13 billion (€15 billion; $21 billion) worth of road projects in the UK with “high benefit/cost ratios but for which there is no cash to proceed,” consultancy Arup and independent motoring charity the RAC Foundation point out in a new study.

The study, which urges the UK government to consider several of the funding models used to deliver road infrastructure internationally, highlights that there are 96 road schemes consisting mostly of “localised interventions at key bottlenecks, bypasses, widening projects and junction improvements” as opposed to so-called “megaprojects”. 

Still, while many of these projects “have exceptionally strong business cases”, Britain’s Highways Agency will only be investing £2.3 billion over the four years to 2014/2015. Making more extensive use of private capital is one of the report’s recommendations to clearing this backlog, but there are obstacles to greater private sector participation in developing the UK’s roads network.

Perhaps the biggest obstacle to overcome is the “absence of significant direct user charges or any other dedicated source of funding to support delivery of the investment required,” the report states. The UK is notoriously ‘toll-averse’ and the study argues that tolls would only probably be feasible for greenfield roads. “In England, the general adoption of motorway tolling for existing motorways, linked to privatisation, could be a step too far,” the study warns.

However, the majority of the solutions proposed to help private capital plug the £13 billion backlog implicitly recognise the need for some sort of tolling. For new road projects, “potential approaches […] may include focusing tolled solutions on corridors without alternative routes; developing projects as government-owned tolls, to be sold once traffic flows have been established; or provision of some form of credit support by public authorities”.

Deeper changes to the management and funding of the UK’s roads network would require “giving the sector a dedicated revenue stream, based on retained user charges and/or hypothecation of some motorway taxes”. This would imply a restructuring of – and more independence for – the Highways Agency.

If this were to happen, the report proposes two solutions to fund and manage Britain’s roads. One would be to import the French model, where the private sector is granted long-term concessions to develop and operate regional or corridor-based networks and where tolls are “adjusted over time to reflect investment plans”. 

The second solution could be to adopt the UK’s regulated utility model and privatise the UK’s roads network “with remuneration based upon a RAB [regulated asset base] and periodic reviews to assess investment plans and funding requirements,” according to the study.

“There is a real opportunity for central government to look closely at what has worked internationally. Part of the solution needs to be about giving local and regional government the opportunity to help get important infrastructure funded through tried and tested methods available from abroad. Such an approach should be entirely consistent with the ministers’ localism agenda,” argues Alexander Jan, transaction director at Arup.

To read the full report, please click here.