21.07.16
Rail projects likely to lose staff and investment following Brexit – Balfour Beatty
The EU referendum result is likely to lead to a prolonged period of uncertainty for UK infrastructure projects, Balfour Beatty has warned.
A new paper from the company, ‘Infrastructure 2050: Future Infrastructure Need’, says that uncertainty around the movement of free labour as the UK withdraws from the EU is likely to make the shortage of staff needed to deliver projects like HS2 worse.
It says that the government must develop an “early and integrated” policy to encourage existing talented immigrants to stay in the UK and more to come, as well as developing its home-grown workforce.
The company also says that the political uncertainty following the UK’s withdrawal from the EU will make private investors, who contribute 69% (£260bn) of infrastructure, nervous of investing more.
It says that HS2, HS3, Crossrail 2 and the Northern Powerhouse have all attracted foreign investment to the UK in recent years because they were perceived as relatively low-risk and stable.
This has led to the country moving from 13th place in the Arcadis Global Infrastructure Investment Index in 2012 to ninth place in 2016.
However, it says: “With the current political and policy uncertainty, any gains we have made in these rankings over the past few years are likely to be lost in the next few.”
The Balfour Beatty/Vinci consortium is currently bidding for the contract for HS2 Phase 1 civils work.
In his keynote speech at Infrarail in April, Sir Peter Hendy, the chair of Network Rail, said that private sector finance was the “obvious way” to deliver rail upgrades.
Other sources of infrastructure funding that the report highlights as being at risk include public sector funding from the newly created Department for Business, Energy and Industrial Strategy and the Skills Funding Agency, which could be diverted to compensate for funding shortages at other government departments.
In addition, Balfour Beatty says the UK will have to give up its position as the joint largest shareholder in the European Investment Bank, meaning that it will lose billions of pounds of funding for projects such as Crossrail 2 and the London Underground upgrades.
It says it is unlikely that the Treasury will be able to make up the funding.
Balfour Beatty said an “urgent debate” is needed on the financing of infrastructure.
It added that now is an “ideal time” for the government to borrow money to finance infrastructure projects because of the historically low interest rates, saying this is far from “an irresponsible course of action” because of the long-term benefits.
Clive Heaphy, HS2’s director of finance and operations, admitted recently that he is “worried” about the impact of the referendum result, despite rail industry leaders saying major projects are “more crucial than ever” following the referendum result.
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