By Daniel Hunter
Businesses are concerned that critical infrastructure improvements are not happening quickly enough and want to see urgent Government delivery on the ground. That is the main finding of the new CBI/KPMG infrastructure survey, Better connected, better business, published today (Monday).
Responses from 568 business leaders during June and July identified transport infrastructure as the area of greatest concern. Nearly three-quarters of firms do not expect to see any improvement in transport infrastructure during the next five years.
About two-thirds of businesses also believe the UK’s energy and water infrastructure is unlikely to get any better because of uncertainty about the policy framework. But companies are more positive about the UK’s digital infrastructure, with most seeing improvements both in the last and the next five years.
And a more recent snap poll suggests 60% of businesses think the new UK Guarantees scheme will help to boost investment, kick-starting infrastructure projects and getting diggers on the ground.
“The Government has shown it gets how important infrastructure is to the economy. It has put the framework in place but needs to show it can deliver on the ground," John Cridland, CBI Director-General, said.
“The new UK Guarantees are seen as positive by businesses, but firms fear initiative overload and are becoming impatient with delivery, leaving many companies still sceptical about the overall impact on investment.
“Whether it’s aviation capacity, electricity markets or funding our roads, the Government needs to take some big decisions which will have a major, lasting impact on inward investment and businesses’ ability to compete overseas.”
Today’s report is the second annual assessment by the UK’s leading business group and KPMG on the state of the UK’s infrastructure, and its impact on business investment decisions and competitiveness.
The findings show that businesses see the quality and reliability of the UK’s transport networks as more important to their investment decisions than any other infrastructure. Having a high-quality, reliable digital network is also increasingly important, with 7% more firms this year (43%) saying they are very significant to their investment decisions.
However, while companies say the UK’s infrastructure compares well with that of emerging markets, it does less well when compared with other EU and developed countries. Nearly two-thirds (61%) of companies think the UK’s infrastructure is less favourable than elsewhere in the EU, and over two-fifths (43%) say it is worse than in other developed economies outside the EU.
“Actions speak louder than words, is the clear message of this year’s CBI/KPMG infrastructure survey. Business confidence in our infrastructure appears to be ebbing away. The key issue is how quickly can recent policy announcements translate into investment on the ground," Richard Threlfall, KPMG UK Head of Infrastructure, Building and Construction, said.
“We’ve seen real improvements in our digital infrastructure, but there’s continuing uncertainty over energy and transport investment. Everyone understands that the Government is constrained financially. But the right government interventions will encourage the private sector to invest.
“The launch of the UK Guarantee programme is welcome but it now needs to be implemented quickly. House building offers the fastest-acting pain relief for our economic headache. In addition, we need to re-introduce tax relief for investment in buildings and structures.
“The need for investment is enormous and individual schemes can be controversial. Delay is often attractive. But only by investing today will we create jobs, drive growth and remain competitive in the global economy. Now is the time to act.”
While many firms (61%) are happy with their links to domestic markets, there is a considerable amount of variation between regions. Whereas in London, over three-quarters (77%) of companies are satisfied with the UK’s domestic networks, just over a half (56%) in the North West and East, and close to two-thirds of those in the West and East Midlands (59%), are unhappy with the quality of their UK connections.
“Whilst many of the findings this year are encouraging, businesses outside London are much less confident that they have the infrastructure they need," Mr Threlfall added.
The local road network is seen by two-thirds (65%) of businesses as being in decline, with congestion and a lack of investment identified as the main causes.
The railways fared better, with nearly half (45%) of companies seeing improvements to intercity rail connections in the past five years, and a positive balance of firms (+64%) believing the planned High Speed 2 line would have a positive impact on their ability to grow.
How different modes of transport interconnect is a major issue for companies, however, and one where very little improvement has been seen over the past five years.
Other key findings in the CBI/KPMG 2012 survey include:
- Almost unanimously (97%), firms say the UK’s planning system is a barrier to delivering new infrastructure. While 45% of companies believe the Government’s changes to the planning system will have a positive impact, a similar proportion (48%) of businesses say they won’t make a difference.
- The availability of direct flights to emerging economies is a concern, with 54% of companies who deem direct flights to China crucial saying they are dissatisfied with current availability. However, most firms are satisfied with the number of direct flights to destinations in the EU (82%) and North America (71%).
- Four-in-five companies (82%) say that the UK’s digital networks have improved in the past five years, and a similar proportion (79%) says they will continue to do so. However, firms on balance rate the UK’s mobile broadband networks as below average when judged on speed and breadth of coverage.
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