Hot on the heels of the Spending Review, the government has published its strategy for the planning and delivery of infrastructure projects over the next decade. We consider its meaning for the construction sector.
Almost a year into the parliamentary term, the government has published two comprehensive strategy documents in the space of a week – the UK Infrastructure: A 10 Year Strategy (the Infrastructure Strategy) and the UK's Modern Industrial Strategy (the Industrial Strategy) – "important milestones", according to the British Chamber of Commerce. Both strategies underpin the Plan for Change that sets out the targets the government aspires to reach by the end of the parliamentary term.
In our recent Trowers & Hamlins' Insight: The UK Government’s 10-year infrastructure strategy - A blueprint for growth and stability, we provided an overview of the key elements of the Infrastructure Strategy and considered the implications for local government. In this article, we highlight key features of interest to the construction industry. Does the Infrastructure Strategy offer a credible pathway and vision for major project delivery, against which the construction industry can invest, plan and look to the future with an element of stability and optimism?
Delivery framework
The Infrastructure Strategy extends more widely than past iterations by bringing together economic infrastructure (digital, energy, flood risk management. transport, waste, water and wastewater) with social infrastructure (housing, hospitals, schools, prisons and courts) into an ambitious long-term plan. Implementation is to be supported by the new National Infrastructure and Service Transformation Authority (NISTA) – a new centre of infrastructure expertise within government (and a new unit within HM Treasury) – which came into existence in April 2025 following the merger of the National Infrastructure Commission (NIC) with the Infrastructure and Projects Authority (IPA) and which combines the long-term strategic policy expertise of the NIC with the IPA’s major project delivery and assurance specialism.
A dedicated and knowledgeable strategic body has long been advocated by the industry to lead a co-ordinated and consistent approach across delivery programme frameworks, and with which the industry can engage. NISTA will be supported by a Council of Expert Advisers, a team of private practitioners that can understand the challenges the industry faces. It will also reinforce compliance by the public sector with the Construction Playbook, for the purposes of achieving consistent and best practice procurements.
To ensure confidence and commitment of resources, the industry needs to have a visible and transparent pipeline of opportunities. A new Infrastructure Pipeline digital portal is due to be launched next month. It will set out project timelines, size, funding status, location and methods of procurement with respect to major economic and social infrastructure projects. This is designed to give a foresight to the industry (and funders) to allow businesses to plan ahead and provide them with the certainty they need to invest in skills, technology and market capacity, to help stabilise and rebuild the recent decline in these areas within the construction industry.
The planning process has often presented itself as a bottle neck. The Planning and Infrastructure Bill, which is presently being debated in the House of Lords, is intended to unlock planning constraints and speed up and streamline the delivery of new homes and economic growth. If enacted, it will represent a significant step change in planning procedure, but this needs to be calibrated against important environmental protection. The government is also fast-tracking 150 planning decisions on major infrastructure projects by the end of the parliamentary term.
Infrastructure funding
The government has committed funding of at least £725 billion for infrastructure over the term of the Infrastructure Strategy.
This funding will be deployed not only in respect of new projects, but also in respect of critical maintenance in the health, education and justice sectors. £9 billion will be allocated in 2025-2026, increasing to £10 billion per year by 2034-2035. Investment in our existing estates to bring them back to a condition of fit for purpose is to be welcomed by those parts of the industry focused on hard facilities management services.
Encouraging private investment
It is clear that government funding alone will not achieve the Infrastructure Strategy's desired outcomes. Fiscal constraints remain prominent, with an underlying reluctance to increase government borrowing. This is where private investment is key, and this is clearly acknowledged by the Infrastructure Strategy that government funding needs to be complemented by private investment.
The government is approaching this in three ways:
- by working with pension funds and other sources of capital, particularly given the commitment of UK pension providers set out in the Mansion House Accord;
- by matching the varied funding sources through public financial institutions such as the National Wealth Fund, appropriate regulation and end-to-end investor support via the Office for Investment; and
- by establishing a visible pipeline of future major project delivery programmes.
There is reference in the Infrastructure Strategy to the continuation of the use of the regulated asset-based funding model for the purposes of delivering economic infrastructure (water, energy and transportation), not least with regard to the Sizewell C nuclear facility and the Lower Thames Crossing. Under this model, the end user/consumer plays a role in the repayment of private investment. However, it is not a model that has a clear and obvious application in the delivery of social infrastructure.
Indeed, the mood music of the industry prior to publication was advocating some clarity and confirmation of the direction of travel with respect to the use of an evolved Public Private Partnership (PPP) model for social infrastructure delivery. It is, on this front, that the Infrastructure Strategy has been a little underwhelming.
PPPs
Seven years have passed since the then Chancellor, Philip Hammond, announced the cessation of the use of the private finance initiative (PFI) as a model of procurement for infrastructure delivery. Since then, the industry has keenly awaited an announcement from the government as to its thinking with respect to a successor.
PFI received its fair share of criticism, some of it not unjustified. However, we live in an evolutionary world. There are lessons to be learned and steps that can be taken to improve on the old PFI model (and its short-lived successor PF2); models in use in Wales and Scotland and some overseas jurisdictions are testament to this. The Infrastructure Strategy has effectively left the door open to the development of a new PPP model, but only in circumstances where appropriate risk transfer can be achieved, together with value for money. We are told that the government will, in the first instance, explore the use of a PPP model in certain types of primary and community health infrastructure, and for taxpayer-funded public estate decarbonisation projects such as the installation of solar PV, battery storage and low carbon heating solutions (where PPP may be considered alongside alternative private finance models). The PPP model is also currently being considered for the finance and construction of Euston Station and the surrounding environs.
Disappointingly, the Infrastructure Strategy has postponed making a full and unconditional commitment to PPPs until later in the year (most likely around the time of the Autumn Budget) and so the wait goes on. There may yet still be a heartbeat in the PPP, but the Infrastructure Strategy as drawn will not instil huge confidence in the construction industry that those historic workstreams will be reinstated forthwith, with a clear picture as to what that PPP model might look like.
Construction skills
Both the Infrastructure Strategy and the Industrial Strategy highlight the skills shortages across the UK and the need to build a stronger skills pipeline for employers. The Department for Work and Pensions, the Ministry of Housing, Communities and Local Government and the Department for Business and Trade and Department for Energy Security and Net Zero have just issued a press release "Thousands more to get the tools they need to start construction careers" that seeks to reinforce the government's commitment to recruit 100,000 more construction workers per year by the end of the Parliament and to put in place more than 40,000 industry placements to be funded through a further £100 million from the government, alongside a £32 million contribution from the CITB. This is in addition to £625 million investment to tackle skills shortages in the construction sector – expected to create up to 60,000 more jobs for engineers, electricians and joiners by the end of the Parliament.
The dawn of a new era or a step in the right direction?
Both the Infrastructure Strategy and the Industrial Strategy are just that, strategies. The Infrastructure Strategy is a vision as to how UK infrastructure can be delivered over the next decade. Taken together, both strategies do give a direction of travel, but as always, further work is required on the detail to facilitate a clear pathway for project delivery, from inception through to completion and the operational phase of a major project.
The government places accountability high on its list of priorities. The Infrastructure Strategy states that the government will work with businesses and delivery partners to implement the strategy and report on the progress being made every two years. This is to be welcomed.
The construction industry can take some encouragement, the Infrastructure Strategy is indeed a step in the right direction, but the dawn of a new era? Not quite yet.
If you would like to discuss the content of the Infrastructure Strategy and/or its implications, please contact us.
