HS2, HS3, Crossrail 2, Hinkley Point C, Thames Tideway, 5G/superfast broadband – you would think the nation’s builders would be licking their lips in anticipation at the prospect of bidding for billions of pounds worth of infrastructure projects.
But many have simply raised eyebrows and shrugged their shoulders. Why?
Planning infrastructure development is a politically powerful statement of confidence. Actually building assets, however, requires something less tangible: skills.
For too long the UK has fallen short in developing and maintaining its skills base. If the country is to deliver the infrastructure projects under discussion, we need to see skills as an equivalent output that is just as important as the physical assets themselves.
To understand the importance of the skills base, and the strategic thinking needed to develop it, it is first worth thinking about the scale of the government’s ambitions.
There are 606 projects in the national infrastructure pipeline. Together, these projects represent £425bn of planned investment. Some major projects, notably a new runway for the South East, can be expected to be added to this list in the near future.
A boom in infrastructure spending would be welcome. But the UK’s skilled workforce does not now have the capacity to deliver the government’s ambitious projects.
What’s more, construction firms fear that spending levels will not match current rhetoric. The private sector will not have an incentive to invest in people while it fears a spending bust coming at the end of the next parliament.
To illustrate this, it is worth looking at official figures.
In June last year, the then-Major Projects Authority rated more than a third of large infrastructure schemes as either “red” or “amber-red”, meaning their feasibility was in doubt. A big reason for this was a shortage of skills. The government estimates that the UK needs 87,000 graduate-level engineers every year for the next 10 years.
So what can be done now to keep infrastructure development plans on track? Should we import the needed skills, as some firms are doing?
But this is not a good solution. Politically, the spectre of Brexit hanging over Westminster makes relying on trained engineers from abroad to deliver nationally significant projects uncomfortable.
It is also questionable from an economic standpoint. If imported talent squeezes out training and apprenticeship opportunities for young people, the economic benefits of the investment will be reduced. Skilled people are needed not only to build infrastructure but also to take advantage of the commercial opportunities that infrastructure can create. Yet construction firms have no incentive to invest in training if they are not confident that those staff can be employed on future projects.
Given that a high-quality construction or engineering higher apprenticeship can take four or five years, the key then is to ensure a sustainable long-term pipeline of projects.
Today, however, the focus is on the short-term: the national infrastructure pipeline is focused on projects for delivery between now and 2020-21.
A more long-term approach therefore has clear advantages.
First, creating a stronger skills base now will de-risk future infrastructure projects. To meet its targets, the government wants to encourage private-sector investment. Yet skills shortages represent a risk factor for private-sector funding, leading to higher risk premiums. Addressing the skills shortage will help solve the funding challenge.
Second, a stronger skills base represents a major export opportunity.
The World Economic Forum estimates that there is a $1tn (£678bn) annual spending gap between global infrastructure demand and investment. China has launched the Asian Infrastructure Investment Bank to help fund emerging market projects.
There is therefore a huge opportunity for firms with the skills and expertise to plan, design, fund and build infrastructure around the world.
If the UK is to fill its skills gap, we need to see developing and maintaining the UK’s skills base as an integral component for infrastructure planning.
