Balfour Beatty, Brexit and Infrastructure

Posted in Infrastructure, mining and commodities

Balfour Beatty, a leading international infrastructure group, has recently published a paper Infrastructure 2050: Future Infrastructure Need which, as well as considering how the UK’s infrastructure needs will change in key areas such as rail, roads and energy over the coming years, outlines the possible impact of Brexit on UK infrastructure.

Balfour Beatty identities a potential skills shortage in the UK construction industry if free movement of labour is curtailed, which will lead to increased costs where demand for labour outstrips supply. They also flag issues with investment in UK infrastructure projects, both from private investors put off by the current political and policy uncertainty and from the withdrawal of European Investment Bank (EIB) funding when the UK exits the EU. The UK is currently one of the EIB’s major shareholders and leaving the EU is likely to lead to loss of that equity stake with a consequent reduction of funding for, or exit of the EIB from, UK infrastructure projects. Over the last five years, the EIB has invested over EUR29 billion in the UK economy and any funding gap left by their exit is unlikely to be filled by UK government funding. These factors are likely to have extensive cost and time implications for UK infrastructure projects, particularly those major projects currently in the pipeline in the UK, for example, Crossrail 2 and HS2.

Balfour Beatty calls for an “urgent debate” on the way we fund infrastructure in the UK given the UK’s infrastructure needs over the coming years and the potential funding gap caused by recent events. As Balfour Beatty identify in their report, it’s not all doom and gloom. With challenges come opportunities, for example; low interest rates may stimulate government borrowing to fund projects, and leaving the EU might lead to a refocus on the UK’s traditional industries of construction, engineering and manufacturing if we are no longer subject to EU rules which restrict these industries. 

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