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High inflation, recession and supply chain uncertainty are jeopardising key infrastructure projects that are crucial to Britain’s chance at economic recovery, according to a new report from construction consultant Currie & Brown.
The 2023 Infrastructure Cost Predictions Report finds that the total cost of Britain’s National Infrastructure Pipeline (NIP) is set to reach £483bn by 2026, of which £84bn is the direct result of inflation. Inflation-driven cost increases could amount to the equivalent of an additional £32,000 per minute, or more than £1,250 per person over five years.
According to the report, if measures are not taken, cost increases, inefficiencies and wastage – all compounded by inflation – will slow down, limit, or cancel infrastructure projects that are essential for Britain’s economic recovery. It finds that, within the current recessionary climate, there is no room for cost increases of any kind, and that “business as usual” project and cost management, could put planned infrastructure projects at risk.
Indeed, for every 1% increase in required expenditure resulting from inefficient project and cost management, the cost of delivering the infrastructure pipeline could rise by an additional £1,500 per minute. Therefore, clear and early planning and effective cost management will be essential to ensure projects are not dramatically descoped or scrapped altogether – in turn wasting precious time, resources and taxpayers’ money.
The threat to the infrastructure pipeline has the potential to undermine Britain’s domestic growth ambitions and prospects for foreign trade, as well as putting the government’s levelling up agenda at risk.
Northern and central England have promised infrastructure investment of at least £72bn by 2026, but with spiralling costs and inflation potentially adding £13.4bn to this figure, the viability of projects going ahead with their original scope is at great risk. This could impact many high-profile planned projects including Northern Powerhouse Rail, Midlands Rail Hub and HS2 Phase 2b.
The report says: “Realistic cost forecasts must be built into project plans as early as possible so that measures can be taken to both assess feasibility and mitigate potential cost increases.”
Currie & Brown chief operating officer UK & Europe Nick Gray said: “Britain has entered recession and inflation remains a significant threat to the financial health of the country. The chancellor has prioritised infrastructure as a key lever for driving labour market participation, growth and productivity, and for accelerating the levelling up agenda.
“However, with budgets so tight and such pressure in the wider economic landscape, we must urgently change the way we approach infrastructure investment if projects are to be successfully delivered.
“A business as usual approach is simply not feasible. We are calling on the government, local authorities and stakeholders to take immediate action. Early and informed decision making will be critical to safeguarding the infrastructure pipeline, and Britain’s economic recovery.”
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