Recently the Treasury set out details of £31 billion of infrastructure and construction procurement activity planned for the next year. This formed part of a National Infrastructure Pipeline the government pledged would support an average of 425,000 jobs per year to 2025.
Infrastructure and Projects Authority Chief Executive Nick Smallwood said the pipeline would “allow industry to plan and strategise for the coming years”.
But to what extent can contractors and consultants bank on the work in the pipeline making it onto site?
Only time will tell, but let’s look at the risks that exist…
We don’t have to look far into the Treasury’s pipeline to see where planning risk could impact the figures. c£4 billion of the value is against a tunnels and approaches contract for the Lower Thames Crossing.
The project has yet to receive a development consent order and National Highways (Highways England at the time) withdrew its first DCO application last autumn following correspondence with the Planning Inspectorate. They submitted an updated version this summer, with changes reportedly costing hundreds of millions of pounds.
Meanwhile the A303 upgrade scheme near Stonehenge faces its own battle. This comes after a High Court judge ruled it was unlawfully approved by ministers. Campaigners are emboldened and further challenges could follow.
With the legal challenge to Heathrow Expansion being overturned last month, it’s clear that a project promoter can adhere to all due process and still have a lengthy delay caused by environmental lobbyists.
In Australia and the US major projects are often negatively impacted when there is a change in government at local or national level. The UK usually fairs quite well at keeping major projects going in the face of political change. But there are no guarantees. Could ministers cut a road or power scheme due to mounting environmental pressures?
Looking at the 10-year horizon, there is risk to the eastern leg of HS2. Speculation has grown that it may never reach Leeds as currently planned. Is the proposed coal mine in Cumbria under pressure ahead of the UK hosting the COP26 climate change summit? Will the UK government decide to shy away from Chinese involvement in key infrastructure? And could that affect planned nuclear plants at Sizewell C and Bradwell?
3. Human resources
Even if all the projects make it to market, are there the people to successfully deliver them?
Construction’s skills shortage is well publicised. With an ageing workforce and a historic failure to attract school leavers and graduates, certain schemes look more vulnerable to talent shortages than others. If all the major projects come to fruition at a similar time there could be a real battle over senior staff, leading to salary inflation and an impact on programmes.
The Construction Leadership Council warned in June that the materials shortage had a long way left to run. Builders’ merchants have spoken of their challenges getting various key products to sites.
Hopefully the shortages caused by the UK’s exit from the EU, Covid-19 and the Suez Canal blockage start to abate in time for projects in the pipeline to get underway. But tender prices could continue to rise and this leads us to our final risk area.
5. Client budgets
In the wake of the pandemic budgets are tight across the public sector. If the risk factors above lead some projects to rise in price, there could be intense pressure to cut costs elsewhere. Understanding which clients and projects are vulnerable could be invaluable to prioritise management time over the coming years.
Uploading a multi-billion-pound contract on an Excel spreadsheet to a government portal is one thing. But getting it through the hurdles of the real world and on to site is quite another. Leaders will be conducting their own analysis of the schemes listed on the pipeline and speaking to those in the know to work out the best places to direct their organisation’s time and resources.
Wise businesses will seek to spread their bets and avoid dependency on one region, sector or client.