By Daniel Hunter
Businesses are concerned that two years of positive Government infrastructure policy announcements will not translate into delivery on the ground and could undermine the return to sustainable growth, a new CBI/KPMG report reveals today (Monday).
The survey of 526 business leaders shows an improving UK infrastructure investment environment, but finds that two out of three firms (65%) believe that government policies will have no tangible impact, or even a negative one. With only a third of businesses (35%) believing that they will make a difference on the ground.
The report, Connect More, highlights the importance of infrastructure to sustainable UK growth, yet with many outstanding issues such as the future funding of the road network, aviation capacity and clarity over the costs of HS2, businesses expect things to get worse over the next five years.
John Cridland, CBI Director-General, said: “Quality infrastructure is vital for boosting exports, unlocking business investment across the UK, and supporting our leading firms — an essential element of a meaningful industrial strategy.
“I know that ministers share my enthusiasm for progress, but Government has talked the talk on infrastructure for the last two years with too few signs of action.
“The faltering speed of delivery on infrastructure creates a worrying sense that politicians lack the political will to tackle some of the major issues head-on.
“We can’t afford any further delay. The Coalition must show strong leadership and prove that the UK can deliver on a small number of projects over the next 18 months and reach a much-needed consensus on bigger issues such as aviation and roads reform.”
Richard Threlfall, KPMG Partner, said: “The state of our infrastructure is not a theoretical debate. For UK business it is about bottom line profitability and international competitiveness. It is about transport networks that get supplies in and products delivered on time, energy supply that is dependable at lowest cost and digital networks that offer fast connectivity anytime, anywhere.
“Sadly the business verdict remains that UK infrastructure is not up to scratch. It is disappointing to hear businesses report once again a sense of more rhetoric than action. Of particular concern is growing dissatisfaction with links between our regions, and the 73% of respondents who believe our local road network continues to deteriorate.
“Overlaid on this is the fear amongst businesses that too many critical investment decisions are being pushed back to beyond the next election. Our businesses are competing each day, every day in the global market, and we need to be investing now in building great infrastructure that is a help not a hindrance to our entrepreneurial efforts. We know what good looks like — we need to get on and build it.”
The CBI is calling for five practical steps to be taken in the next 18 months to boost immediate construction, while also setting the groundwork for longer-term decisions:
- Boost investment by introducing capital allowances for the construction of infrastructure projects at the Autumn Statement.
- Complete all feasibility studies for road and rail projects outlined in the Spending Review and commit to detailed plans for delivery, while starting the debate on longer-term road reform by conducting an audit of the state of the road network and its costs to operate.
- Enshrine the Energy Bill into legislation and bring forward secondary legislation to provide businesses with the certainty they need to invest in our future energy supply.
- Commit to implement the findings of the Airports Commission in party manifestos.
- Collaborate with industry on a long-term plan for digital infrastructure, enabling businesses to make use of a wide range of technologies.
Exports: Since last year’s survey, businesses progressively view direct flights to emerging markets as key to their success — China (57%), India (50%), Brazil (46%), Russia (36%).
But as businesses look to new markets, dissatisfaction with the UK’s existing connectivity also grows - less than half (47%) of firms currently using links with emerging markets are satisfied - down from 60% in 2011.
With a decision yet to be made on aviation capacity, only 28% of respondents expect improvement in the UK’s air links in the next five years, while 31% expect them to deteriorate.
Regional regeneration: Nearly two-thirds (62%) of all businesses and 85% of multinationals highlighted that domestic transport was a key consideration in deciding where and when to invest.
Dissatisfaction with domestic transport has jumped from 28% in 2011 to 49% in 2013.
With relatively few projects underway on the ground and no action on long-term road reform, there is widespread expectation that local roads (-43%) and motorways (-26%) will deteriorate over the next five years.
Energy: Energy has overtaken transport since 2012 as the biggest future concern for businesses.
More than three quarters (77%) of respondents report that they are not confident of improvements in energy infrastructure over the next five years (rising to 86% for manufacturers).
95% of firms are concerned about the cost of energy and 90% are concerned about security of supply.
Digital infrastructure: Encouragingly, progress has been made on the UK’s digital infrastructure, which businesses now consider as important as transport and energy.
Four fifths of firms consider faster and more reliable fixed-line (85%) and mobile broadband (84%) as critical to their success.
But more needs to be done to increase the awareness and take-up of digital — the UK economy could benefit to the tune of £18 billion a year if more of the firms sold and marketed online.
The UK’s investment environment: The UK is increasingly perceived by infrastructure providers as an attractive place to invest, having overtaken the EU as an investment location. But the UK still lags behind competitors in Australasia, North America and the Middle East.
With 85% of projects in the National Infrastructure Plan needing to be delivered by the private sector, businesses want further action to make the UK stand out from the crowd, including the introduction of a capital allowances for construction of infrastructure projects.
John Cridland concluded: “The huge number of businesses concerned about energy supply and costs is alarming. The Government must get the Energy Bill onto the statute books and bring forward secondary legislation to give potential investors the certainty to deliver the energy infrastructure we need to keep our lights on in the future.”
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