“Systemic weaknesses” in the way the UK delivers major infrastructure projects drive up costs by as much as 25%, according to the National Infrastructure Commission (NIC).
A new report by the government agency found infrastructure costs are too high in this country and “have been for decades”, a problem which it said the new government needed to address in order to achieve its infrastructure ambitions.
The publication of the report came on the same day that the government announced a new body combining the NIC with the Infrastructure and Projects Authority (IPA).
Chief secretary to the Treasury Darren Jones confirmed the creation of the National Infrastructure and Service Transformation Authority at a speech at Skanska’s Watford headquarters this morning.
He promised the new body would “get a grip on the delays to infrastructure delivery that have plagued our global reputation with investors”.
The NIC’s report compared the cost of different types of infrastructure schemes with those overseas.
It found that while costs in most UK infrastructure sectors were not significantly different to other countries, nuclear power stations, high speed rail and rail electrification schemes have all “historically faced particular cost challenges in the UK”.
It also highlighted that construction outturn costs in the UK had risen by around 30% more than GDP per capita since 2007.
Researchers identified four key factors which increase costs and delivery times, a lack of clear strategic direction, challenges with project clients and sponsors, inefficient consenting and compliance and a constrained supply chain.
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A lack of clarity on what standards projects need to meet to reduce impacts on the built and natural environment leads to risk aversion from clients or developers who fear legal challenges, the report said.
As a result, increasingly cautious choices are made to address opposition to schemes which “significantly” drive up costs.
At a system level, government agencies tasked with issuing permits or asking for measures to reduce the impact of major projects have little incentive to consider the impact of their proposals on costs.
These impacts can be direct or indirect through late changes which drive up overall costs. In some cases, such as rail engineering, high standards can contribute to a culture of risk aversion which stifles innovation and keeps costs high, according to the report.
Disjointed accountability among sponsor bodies, puiblic sector clients and government departments can also lead to strategic incoherence and delays, while the relatively small size of UK construction firms means the sector is not always ready to respond to demand.
The report found that underinvestment in training is largely down to lack of a visible pipeline of project opportunities, again driven by lack of strategic clarity from government.
Labour has promised to unveil a 10-year infrastructure strategy in response to criticisms from industry about the previous Conservative government’s policy inconsistency on infrastructure.