Spending Review: is infrastructure boom finally on the cards?

Last week’s Spending Review marked a turning point for the government’s infrastructure strategy. Major investments in transport, energy generation and the public estate have been long-awaited and will hopefully catalyse construction activity and economic stability.

Publication of the 10 Year Infrastructure Strategy and forward pipeline of projects should also help to crystallise demand, and potentially investment. But in the immediate wake of the Spending Review, is it too early to take significant infrastructure growth as read?

BCIS’s head of data services, Karl Horton, explores.

A new leaf for infrastructure

With significant capital spending confirmed for the next decade, the government has finally put its foot on the gas when it comes to rolling out its infrastructure strategy. The big question now is whether this will translate into projects starting on time and later, completing to schedule and on budget.

Of course, it’s hard to predict at this stage. The capital investments announced last Wednesday will be spent over the next five years, during which time inflation and other factors, such as geopolitical tensions and how quickly labour gaps are addressed, could introduce delays and overspend.

Sizewell C follows in the footsteps of Hinkley Point C which, due to Brexit, the pandemic and inflation, is expected to finish in 2031 ⁽¹⁾ – four years late and several billion pounds over budget. As highlighted by BCIS’s chief economist, Dr David Crosthwaite, the £14.2 billion allocated for Sizewell C therefore seems a little light.

That said, this injection, coupled with the scheme’s regulated asset base (RAB) financing model, could be the incentive needed to mobilise private sector interest. The RAB model means risks present throughout the construction and operation of Sizewell C will be shared across investors and customers. Established under the Nuclear Energy (Financing) Bill, the model essentially allows EDF to charge customers at a regulated price on the condition that Sizewell C is delivered⁽²⁾.

In principle, the RAB model should lower costs for investors and minimise bumps in the road to completing the new nuclear plant. Only time will tell if this is actually enough to compel investors and save costs in the long run.

That aside, the government’s commitment to investing in legacy projects is a promising sign for infrastructure growth generally. Wrapping up Sizewell C and HS2’s Birmingham Curzon Street to London Euston leg are essential for transforming the UK into a hub for foreign investment. For too long, delays and budget overruns have dominated the headlines surrounding the UK’s national infrastructure. The Spending Review was a step in the right direction to changing this perception.

This included committing £10.2 billion to rail enhancements. Over half of this (£6 billion) has been allocated to the TransPennine Route Upgrade and East-West Rail, which were both launched in 2017 and are fundamental for boosting regional economies and employment⁽³⁾. Rail developments are also key in optimising the flow of goods and resources, which, to a certain extent, will have a positive bearing on reducing delays in future infrastructure work too.

Since the Spending Review, the government has also confirmed a £7.9 billion flood defences package and allocated £1 billion for a new structures fund, including £590 million additional funding to progress the Lower Thames Crossing project. Given the scheme’s priority and the need for private sector backing, it’s likely more government funding is on the way. If successful, the public-private partnership being considered for the scheme could set a positive precedent for this funding model for projects to come.

However, a steady trickle of project announcements is not what the construction sector is banking on. At the latest meeting of the BCIS Civil Engineering Tender Price Index Panel, attendees reported that the sector has adopted a ‘wait-and-see mentality’ with businesses remaining cautious while project start dates under the infrastructure strategy remain unknown. Some even warned it could be a slow year for infrastructure.

The strategy is the missing puzzle piece, and without the clarity and confidence it promises to bring, it’s not clear yet if significant infrastructure growth is round the corner. Let’s just hope it’s worth the wait.

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^{(1) The Guardian – Hinkley Point C could be delayed to 2031 and cost up to £35bn, says EDF  – here}

^{(2) GOV.UK – Future funding for nuclear plants – here}

^{(3) HMT – Spending Review – June 2025 – here}