Will the go-ahead of the Lower Thames Crossing be enough to attract private investment to UK construction and boost growth?

In March the government finally granted planning permission for National Highways’ (NH) A122 Lower Thames Crossing (LTC) project. This will link Kent and Essex via a 2.6 mile tunnel under the Thames in an effort to end traffic congestion on the Dartford Crossing, which currently handles on average 150,000 vehicles a day, and free up one of the country’s most vital trade routes⁽¹⁾.

The decision has been lauded by supporters of the project, such as Dartford MP Jim Dickson who sees the move as integral to the government’s economic growth plans⁽²⁾. It’s a positive signal for construction too, as it demonstrates a commitment to infrastructure development and has the potential to boost industry morale.

However, questions remain over how the project will be financed. In its application, NH set out three delivery options for the government to consider. Aside from full public funding, which the government appears to have dismissed as it has said it is exploring private finance options, NH put forward full public funding for the tunnels, with the connecting roads being delivered and funded by the private sector under Design, Build, Finance, Operate and Maintain contracts, as well as the option of a regulated private entity model, under which a private sector body finances, builds and operates the project in its entirety, subject to the oversight of an independent regulator.

With alternative funding options now integral to the project’s success, Dr David Crosthwaite, chief economist at BCIS, examines whether LTC could unlock a new era of private investment in UK construction.

Economic uncertainty – what’s the current growth picture?

Estimated to cost around £9bn⁽³⁾, it’s hoped the project will be a boost to British jobs, with plans to train and employ almost half of its workforce locally, equipping them with skills for future projects. Construction on the tunnel could begin as early as 2026 with an expectation it could open in the early 2030s. But, with UK fiscal headroom ever-narrowing, the Chancellor is feeling the pressure to limit government borrowing and reduce taxpayer burden – according to the Office for National Statistics, government borrowing in the financial year ending (FYE) March 2025 overshot forecasts by the Office for Budget Responsibility (OBR) by £14.6bn⁽⁴⁾. These most recent figures will no doubt consolidate the Chancellor’s reasoning for seeking private finance.

There are some positive signs for the UK economy. The latest Office for National Statistics (ONS) figures for February showed higher than anticipated economic growth, with a 0.5% increase in gross domestic product (GDP) that included growth in construction. In the sector, output grew by 0.4% in February this year, offsetting a 0.3% decline in January; driven by increases in both new work (0.3%) and repair and maintenance (0.5%). However, on a quarterly basis, output has flatlined, with no growth evident in the three months to February – this doesn’t demonstrate the government is achieving its goal to ‘get Britain building again’.

Inflation in the UK is continuing to fall but it’s still above the Bank of England’s 2% target. Trump’s trade war with China and the ongoing conflict in Eastern Europe have only added to the uncertain economic environment. Indeed, the global outlook appears equally bleak with the International Monetary Fund (IMF) downgrading its global growth forecast by 0.5 percentage points (pp); with the UK economy forecast to grow by 1.1% this year – 0.5% less than January’s forecast.

With the combination of stagnant GDP growth (hovering around zero) and high inflation stagflation in the UK remains a distinct possibility, it’s unlikely one project announcement will be enough to inspire the confidence required to engage the private sector.

Terms and conditions apply

If the project is to be funded by tolls or user charges, this would be a relatively straightforward and reliable mechanism for funders to gain a substantial return on their investment.

Future investment will depend heavily on how the government intends to structure risk, returns, and governance under new private finance frameworks. Therefore, investors will, no doubt, be keeping an eye on what will be outlined in the 10-Year Infrastructure Strategy⁽⁵⁾; scheduled for publication in June. The government’s stated aim of the strategy is to ‘set out what the public can expect from infrastructure services and provide certainty to industry on the government’s priorities for infrastructure.’ It also aims to ‘help inform and drive investment by companies supporting and delivering infrastructure services.’

To oversee its implementation, the government has combined the functions of the former National Infrastructure Commission and the Infrastructure and Projects Authority to establish the National Infrastructure and Service Transformation Authority (NISTA) – with the aim of improving the delivery of major capital projects with one key aim stated as: streamlining planning to speed up the consenting process for major projects⁽⁶⁾. The Planning and Infrastructure Bill – introduced to Parliament to accelerate infrastructure development – has also been debated and is currently at committee stage.

These developments will be encouraging news to investors but, crucially, their main focus will be the Infrastructure Strategy, to see if funding criteria is tipped in their favour. Investors can, and do, walk away from projects if risk thresholds or funding terms don’t suit them. A recent example is Gatwick Airport’s expansion, where its funders were rumoured to be deterred after additional approval requirements were introduced. The project’s final approval has now been deferred until October.

Therefore, without favourable funding criteria and certainty, even high-profile projects may collapse or face prolonged delays.

In addition to this, investors could be further deterred by the emphasis of the use of sustainable materials on the project, which aims to reduce carbon emissions by up to 70% during construction through the use of low-carbon steel and timber, including alternative fuels like hydrogen. If investors don’t have a guarantee that we can produce these materials domestically, the reliance on imports in a time of trade wars and global conflicts could raise serious concerns over supply chain issues. Confidence is also likely to be dampened further by the threat of delays to projects, caused by disruption to supply chains, as investors fear their returns could be eroded by inflation.  Therefore, with financial frameworks unknown and continued uncertainty, no investor will commit capital, regardless of how shovel-ready a project might be.

Pipe dreams

One of the biggest deterrents to investment is the lack of a coherent, committed project pipeline. The government has yet to produce a refreshed infrastructure pipeline, although it’s expected this will be published in June this year to coincide with the second phase of its Spending Review and 10-year Infrastructure Strategy. Ahead of the strategy’s publication, the Confederation of British Industry (CBI) has called for ‘confidence, certainty and a clear plan to get Britain building’ on behalf of businesses in a wide variety of sectors that included construction, energy and manufacturing⁽⁷⁾.

CBI welcomed the government’s decision to proceed with infrastructure projects that include LTC, but says ‘the most important thing the strategy can do is give a concrete outline of what the Government is publicly committing NISTA to deliver in full over the decade’, adding that ‘with the right pipeline industry can have confidence it will be achieved.’ In addition to ‘pipeline clarity and transparency’, the CBI also called for more details, including ‘the duration of the spend on projects, the funding status, the project’s status in the planning process, likely quarterly start date, and the procurement status.’

CBI also highlighted the ‘stop-start’ nature of infrastructure investment in the UK that has contributed to labour shortages in the industry, as the sector has hesitated to invest in skills and training. It recommended the strategy includes ‘a multi-year skills and capability plan, developed in partnership with Skills England’ that addresses ‘current and future industry requirements’. Long-term project continuity would certainly be a huge step forward in incentivising companies to create more direct employment opportunities, although the importance of overseas workers in tackling immediate shortages can’t be overlooked either. LTC is a start, but investors will no doubt be biding their time to see what’s outlined and confirmed in June.

Fiscal constraints versus economic stimulus

Labour’s commitment to adhere to its fiscal rules has so far prevented bold public investment moves. But if we enter a prolonged period of stagflation and trade wars threaten global growth, the government may be forced to consider relaxing fiscal rules or launch an emergency budget to increase taxes to unlock infrastructure spending.

However, this move could prove particularly unpopular, considering the ramifications of the Truss/Kwarteng mini-budget episode that occurred the last time this happened. Anything to further rock already fragile market confidence could prove damaging, especially as investors remain wary of policy instability. There’s also speculation personal taxation could be raised to create fiscal space as any further business taxes could stall investment even further.

Conclusion

While project approvals such as the Lower Thames Crossing and the establishment of NISTA are welcome signals, they’re unlikely to be enough to usher in a new era of private infrastructure investment in the UK. For investor confidence to grow, the government must move beyond rhetoric and deliver concrete measures that demonstrate a serious commitment to long-term infrastructure delivery – the most paramount is an updated National Infrastructure and Construction Pipeline that also includes transparent funding criteria.

A clear, committed pipeline would restore confidence, guide investment decisions, and send a signal to businesses that now is the time to invest in skills and delivery capacity.

The government has said that private finance will be needed to help deliver infrastructure. But that won’t happen overnight. Projects like the Lower Thames Crossing will see further delays linked to the complexities of private funding. Without clear funding criteria and a predictable regulatory environment, investors will hold back.

Ultimately, a functioning infrastructure sector needs timely decisions, transparent plans, and consistent leadership, not delays or mixed messages. It remains to be seen if NISTA and the documents, due to be published in June, have the potential to be a positive force for the industry and the wider economy.

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^{(1) National Highways – Government gives planning permission to the Lower Thames Crossing – here}

^{(2) BBC – Lower Thames Crossing needed for ‘economic growth’ – here}

^{(3) New Civil Engineer – Reeves confirms government is seeking private finance for £9bn Lower Thames Crossing – here}

^{(4) Office for National Statistics – Public sector finance – here}

^{(5) GOV.UK – 10 Year Infrastructure Strategy Working Paper (accessible) – here}

^{(6) Institution of Civil Engineers (ICE) – What is the National Infrastructure and Service Transformation Authority (NISTA)? – here}

^{(7) The CBI – Unlocking investment: what businesses need from the Infrastructure Strategy – here}