BCIS reacts to Heathrow runway and government growth plans

After a turbulent start to the year, Rachel Reeves will have been hoping to reassure the market as she delivered further details of her growth plan in what was dubbed as a major speech for the Chancellor.

Speaking at Siemens Healthineers in Oxfordshire, Reeves confirmed the government’s support for a third runway at Heathrow and said private investors were being sought for the long-delayed Lower Thames Crossing.

Reeves also announced support for several other schemes, including:

• A review of the Green Book, used by officials to assess public investment for projects.
• £7.9 billion investment in nine new reservoirs.
• 4,500 new homes enabled in Cambridge due to water infrastructure improvements.
• East-West rail project – new services between Oxford and Milton Keynes, with new towns between.
• AI Growth Zone in Oxfordshire.

Is there enough in the proposals to reassure the sector that growth is on the horizon?

Dr David Crosthwaite, Chief Economist at BCIS, said: ‘The Chancellor’s speech to “kickstart economic growth” seemed like an attempt at stimulus without spending new public money, made largely I suspect to calm the bond market. 

‘Government support for a third runway at Heathrow will eventually boost growth, but the project would be delivered and paid for by private organisations. It will clearly be years before any building work starts on site and this won’t have an immediate impact on growth, but is likely to support it in the long-run.

‘The other broadly positive announcement was support for £8 billion for new reservoirs, but again these are to be delivered and paid for by private organisations.

“More concerning was the mention of the Lower Thames Crossing project and the government’s attempt to attract private finance, which could lead to further delays in delivering that project.”

The decision on whether or not to approve the Lower Thames Crossing development consent order is due to be made by the government in May.

In her speech, Reeves referred to a different approach to public investment, saying the government has a new investment rule to ‘ensure we don’t just count the costs of investments, we count the benefits too.’

She said: ‘We are now investing 2.6% of GDP on average over the next five years compared to 1.9% planned by the previous government, delivering an additional £100 billion pounds of growth-enhancing capital spending, which catalyses private sector investment in more housing, better transport links and clean energy.’

Dr Crosthwaite said: ‘I was pleased to hear Reeves talk about counting the benefits of schemes, not just the cost. This is a principle that sometimes gets lost on major projects, especially when there is controversy around overspend. It’s important to reflect on projects once complete and to see the positive impact they have over many decades.’

For BCIS Chief Data Officer Karl Horton, the government’s plans are crying out for more consideration of the workforce needed to deliver the schemes.

He said: ‘As an industry, we must now expand our capacity to meet the demands of this long-term growth strategy. Today should serve as a catalyst for much-needed investment in developing the next generation of construction talent, which will be crucial over the next decade and beyond. Without it, many of these projects will face inflated costs as they compete for a limited pool of resources.’

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