Budget reaction: how will it impact infrastructure and major projects?

With key major project decisions deferred to the spring Spending Review or delayed beyond it, and barely a direct mention so far for construction in the government’s 10-year industrial strategy, BCIS Chief Economist Dr David Crosthwaite and Chief Data Officer Karl Horton reflect on how infrastructure fared in the Autumn Budget.

Dr David Crosthwaite

The infrastructure sector needs clarity and commitment, and it needs more investment if it is to help drive real economic growth. A key aspect to that would be updating the existing National Infrastructure and Construction Pipeline or publishing a new one, which was a long-unanswered call under the previous government.

The commitment to continue HS2’s tunneling between Old Oak Common and Euston is a positive but partial step, as funding for Euston station itself remains dependent on finding private financing. Similarly, the Lower Thames Crossing is still waiting for clear government direction, which isn’t now going to come before May 2025.

Major infrastructure projects attract a lot of criticism because they tend to go over budget and take longer than expected but, as we’ve seen with Crossrail, once the work is completed, you wonder how you ever managed before. We shouldn’t view these projects solely through a cost lens, but think about the benefits you get at the end and for years after too.

I sense a pivot towards reviving public-private partnerships, which could be instrumental for Lower Thames Crossing funding, especially if structured around tolls. But relying on private investment alone won’t address the wider sector needs. Stakeholders need timely and transparent updates to guide their investment and planning, and key decisions being delayed until the Spending Review adds to the uncertainty.

On the face of it, there wasn’t much in the budget that will spur on big building projects. There’s a £500 million cash increase on 2024-25 baseline funding for potholes, but five cancelled road projects on top of what’s already been scrapped.

And there’s a lot still to be revealed, with perhaps the more significant spending announcements for construction due in the spring.

Karl Horton

Programme announcements in the budget included:

• Hospitals – committed an additional £1 billion to upgrade buildings across the NHS estate. Continued delivery of the New Hospital Programme, but ‘on a more sustainable and deliverable footing’.
• Schools – committed £1.4 billion to fund the existing school rebuilding programme, an additional £550 million. An additional £2.1 billion for improving the condition of the school estate, an increase of £300 million.
• Prisons – commitment to accelerate the building of new prisons by reforming the planning system. Investment of up to £2.3 billion in prison expansion across 2024-25 and 2025-26, including a new prison at HMP Millsike.

Taking a more phased approach to programmes as a way to manage costs more effectively over time has some benefits in the short-term, but the reality is that inflation can increase the eventual costs for deferred phases, potentially eroding the intended savings from delaying projects.

To ensure the effective delivery of healthcare, welfare, and education programmes, it is essential for the respective departments to constructively engage with the supply chain. Two key strategies can significantly enhance this process. First, implementing a comprehensive data management process can establish an internal knowledge repository, empowering departments with valuable insights. Second, adopting benchmarking practices helps validate supplier costs and set realistic construction budgets. A strong data management framework not only fosters continuous learning and improvement within departments, but also maximises value and efficiency across projects.

The construction industry faces compounding issues of workforce shortages, which will likely be exacerbated by increased employment costs. We’ll need substantial focus on workforce development if we’re to meet ambitious building and infrastructure goals.

Even in the week since the budget was delivered, the global economy has taken on a much more uncertain outlook with the election outcome in the US. The potential impact on international supply chains, driven by trade policies as well as possible geopolitical interventions, adds further unpredictability to the situation.

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