March 20, 2013 / 5:52 PM / 5 years ago

Osborne infrastructure plans disappoint British industry

LONDON, March 20 (Reuters) - Government plans to increase infrastructure spending will not be nearly enough to fix Britain’s infrastructure backlog, boost its ailing construction industry or kick-start growth, industry experts warned on Wednesday.

Finance minister George Osborne said in his budget speech that he would spend an extra 3 billion pounds ($4.54 billion) a year from 2015/16 on infrastructure projects.

“Regrettably the announced sum is insignificant relative to the infrastructure backlog,” said Richard Abadie, global head of infrastructure at PwC.

“The reality is it won’t make a significant impact on economic growth as it comprises less than 0.2 percent of GDP.”

The government has put infrastructure at the heart of its strategy to boost the flat-lining economy, and is planning to upgrade Britain’s creaking roads, railways and airports with 500 projects worth 310 billion pounds between now and 2050.

Though this will be done mostly through private financing, the plans announced on Wednesday will be financed from cuts in departmental spending.

Jon Porre, public sector director at construction consultancy Turner & Townsend, said that the infrastructure spend increase was an acknowledgement that Osborne’s plan to rely on private sector financing was struggling.

“In the past year total infrastructure spending shrank by 12 per cent as the private sector steadfastly refused to take on the role of white knight. Progress on the chancellor’s wish list of infrastructure projects has been underwhelming,” he said.

Earlier this month, the Treasury ditched a plan to use private sector money to fund the building of trains for its 16 billion pound Crossrail project in London, putting taxpayers on the hook for an extra 650 million pounds. [ID: nL6N0BTD95]

Construction firms had hoped that the chancellor would give details of the pipeline of projects that would come under PF2, his new version of the private finance initiative announced in December, but he did not do so. [ID: nL5E8N55UH]

The weak construction industry was the main drag on Britain’s GDP growth last year, putting the country back into recession. Balfour Beatty, one of the largest firms of its kind listed on the FTSE, expects a 20 percent fall in UK construction revenue this year. [ID: nL6N0BZ1P9]

John Denning, director of group corporate affairs at construction firm Carillion, said that the 2015/16 start date meant the plans would not help the immediate problems in the construction industry.

“We believe that the government has opportunities within its existing infrastructure plans to move faster,” he added.

There was also speculation that Osborne would establish an independent body to oversee infrastructure to avoid projects becoming beholden to political timetables after a review from former Olympics CEO Paul Deighton.

Instead the government said that it was simply considering making more use of independent expertise in shaping its infrastructure strategy.

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