Both public and private spending on big projects has fallen sharply since the Brexit vote, this could be the precise opposite of what the UK needs.
So the doctor took out the thermometer that was resting in his patient’s mouth. He asked the patient to open her month and say “arrr.” After completing his examination, he said: “Ms Britannia, with interest rates so low I prescribe a massive jump in investment into infrastructure.” Alas, when the doctor had left, the patient turned over, and went back to sleep.
If there is one lesson from the UK’s Rio Olympics’ success it is that money does create results. It is also possible to pick winners. And with the yield on UK government 30 year bonds standing at 1.33%, some might say spending on infrastructure it is a no brainer.
Yet in July infrastructure spending fell to £1.5 billion, 20% less than in June, and 23% less than in July 2015.
The Financial Times (FT) cited figures from the Office of Budget Responsibility (OBR) indicating that in 2008 net public sector investment was £51.5 billion, 3.4% of GDP, but in 2015 it was £33.2 billion, 1.8% of GDP.
The FT also cited anecdotal evidence that the private sector was putting major projects on hold too.
According to the World Economic Forum, the UK stands at number 24 for quality of infrastructure.
On the other hand, finding the fix is easier said than done. It is not like the Victorian times, when planning permission was an alien concept. These days if feels as if you have to get town council approval to sneeze in the wrong direction.
And while the UK could greatly increase its infrastructure spending by giving the green light to Hinckley Point, the massively expensive prospective nuclear power station, a new London airport/runaway, and HS2, all projects are highly controversial and it is far from clear which is the best approach.