‘I think 2016 could be a year of paradox’

Alexander Jan, a director in Arup’s City Economics group, describes 2015 as a year of growth and consolidation for the firm. As population growth continues apace, delivering housing and supporting infrastructure has risen to the top of the British political agenda, as evidenced in the Chancellor’s Autumn Statement. This is translating into a greater sense of urgency and delivery activity.

But growth in the UK is uneven. “There is a high level of private sector buoyancy in the South East. Some longstanding projects, such as Crossrail and the Tube upgrades are in full swing. But whilst confidence is growing in other parts of the country – around the Northern Powerhouse and Highways England investment for example – many other projects are at relatively early stages of development.

“I think 2016 could be a year of paradox. On the one hand, Government increasingly asserts its support for infrastructure. On the other, austerity means funding constraints. Ministers are increasingly expecting private developers to fund supporting infrastructure. This has big consequences for the design, density and economics of new commercial and residential projects. Don’t underestimate the impact locally. Communities and their authorities will need to benefit increasingly from the prosperity new development brings.”

Alexander was a leading light in developing the MCA’s 2013 report Building Blocks: How Britain can get infrastructure right. He acknowledges that things have moved in a positive direction since then, consistent with many policy prescriptions set out in the report. The Government has set up a National Infrastructure Commission to provide strategic direction to UK infrastructure planning. The Treasury has signalled it is going to allowing councils to retain business rate revenues, a key incentive for driving through local infrastructure schemes, although details remain hazy.

“In the MCA’s Year of Growth, we should encourage Government to do more. Business rate reform should be accompanied by another big push on devolution. Local councils need resources and powers to invest in their local economies.” He thinks additional property taxes – including stamp duty – should be handed to local government. “Ironically, councils have been perhaps too good at delivering austerity. They have demonstrated their capacity to make sensible trade-offs between service spend and spend on growth-generating assets. They now need to be allowed to get on with the job of delivering growth. But they need the right incentives to do that.”

Alexander suggests more has to be done on financing mechanisms. “Efforts to secure private funds have to be redoubled. There are still barriers. We make it easy for investors to put cash into property. But investing in rail or roads is a convoluted process. Where is the framework? Even the biggest pension funds struggle because of liquidity constraints.” Alex believes project bonds are part of the answer. “This model’s used abroad. It could ease liquidity problems. We need to see the return of some sort of bond insurance market, even if that takes government to provide guarantees.”

Alexander argues that consultancy needs to be prepared for this increasing emphasis on infrastructure delivering broader economic impacts and for the enlarged responsibility for the private sector in performing the role of the state. “You don’t need to look far. The vibrant regeneration of King’s Cross St Pancras, which we’ve witnessed first-hand, has done great things not just for transport but the local and national economy. We need to replicate that success. Not just in London, but across the UK.” 

 Alexander Jan, Director at Arup, was interviewed for the MCA End of Year Report  2015.