Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
When not writing this column, I am overseeing my own once-in-a-generation infrastructure project. As dust levels rise and bank balances fall, I am determined to relieve bedroom bottlenecks and improve cohabiting comfort while maintaining the fiscal discipline that my mortgage provider demands.
As such, I am pioneering a world-first save on stairs programme (SoS). The value of my extra home capacity will not be compromised by near-term reliance on alternative connectivity arrangements, like ladders or perhaps a rope. Thanks to the UK government and its work on HS2 for inspiring this innovative solution.
The £100bn high-speed railway is becoming the poster child for the curse of British infrastructure. Depending on who you ask, it is too big, too expensive, or the wrong thing to be doing to start with. Even its supporters (me included) despair. After axing the eastern leg to Leeds, the government is considering scrapping the western leg to Manchester and ending the route outside central London at Old Oak Common. What benefits would remain? “Virtually none,” concludes one person involved in its lengthy inception.
HS2’s wider benefits were never well understood or communicated. Speedier trains mean shorter journey times. But a high-speed line should also free up capacity elsewhere for more local services or freight, and act as a backbone to other improvements. Now, as political will fades, the congested capital may not have easy access to HS2 and the part of the country that should benefit most (the north) faces being cut out entirely. Yet the 2020 Oakervee review, the basis for HS2’s approval, said “the full network is needed to realise the benefits of the investment”.
Indecision is both a symptom and cause of Britain’s infrastructure plight: that everything costs so much to build. My colleague John Burn-Murdoch has looked at how sclerotic planning and nimbyist tendencies push up costs, with rail projects, road lanes or motorway bridges far more expensive than in most other countries. Another issue is the UK’s peculiar inability to write down a long-term plan for its infrastructure, debate it and stick to it.
Dithering is inherently costly in building projects. Bills tick up while everyone deliberates. Contracts must be recut. An industry rule of thumb holds that a fifth of a project’s capital cost goes to design and development. Each efficiency or change risks writing off past work and incurring more design costs, especially for something as complex as HS2.
Political thumb-sucking, and disinclination to commit to steady spending over the medium to long term, are particular problems. The UK is a laggard in rail electrification, with costs as much as three times over the odds because of a lack of consistency, argues Sam Dumitriu from campaign group Britain Remade. Germany has plodded along electrifying 200km of lines a year; the UK has bounced from nearly 600km in some years to zero in others.
Bemoaning start-stop investment isn’t new: a 2010 Treasury report into “excessively high” infrastructure costs found that “the lack of visible and continuous pipeline of forward work flow” was one of the biggest issues to address.
One knock-on effect is in skills, both in industry and government. Despite efforts such as the Major Projects Leadership Academy, the ability of the civil service to oversee big infrastructure development remains questionable, meaning greater reliance on consultancies. Companies have little incentive to invest in training and career development without a pipeline of work. Specialist skills, such as that taught at the welding academy set up for the nuclear construction at Hinkley Point C, dwindle when there isn’t more work to move on to. Knowhow isn’t transferred from one (preferably standardised) project to the next.
A patchy pipeline contributes to a fragmented UK sector, again something flagged in the 2010 report. Companies don’t build bigger in-house capabilities or invest in advanced technology when their biggest client is erratic. The UK’s biggest construction group, Balfour Beatty, with about £9bn in revenues last year, is dwarfed by French or Spanish contractors such as Vinci with €62bn in revenues or ACS with €34bn.
Large UK contractors employ only 14 per cent of the construction workforce, with 86 per cent in small and medium-sized enterprises, according to Noble Francis at the Construction Products Association. “The volatility of infrastructure demand means that the business models of contractors are not based on the most efficient ways of working but on dealing with volatility, which means subcontracting out the cost, activity and risk to smaller specialist contractors,” he says.
If I ever embark on another personal infrastructure project, I will have learnt from current experience. It’s not obvious that the UK, over many decades, can say the same.
Letter in response to this column:
HS2 is a solution in search of a problem / From Sarah Flannery, Knutsford, Cheshire, UK