In my professional life until very recently I have been heavily involved in business development for major civil engineering companies.
Looking at this list of proposed new projects in the Government’s New Infrastructure Project one thing strikes me very forcefully is that most of these projects are not at all new. In fact there are projects on the list that I was visiting the promoters a decade or more ago.
Many of these projects were not viable then, and most are unlikely to be viable today. They are in effect zombie projects.
It is a characteristic of our system that almost all projects follow the same route. Firstly some individual gets an idea, and this individual is generally reaching the final five years of their careers. The idea is a great one, and it gets taken up by a group of like minded investors, and often gets to a point where it goes to planning or to the public.
At this point it starts to go pear shaped. Suddenly a whole suddenly a whole series of publically funded official stakeholders become involved in the project. They are only interested in the process and not the outcome.
Indeed in many cases they would rather that the outcome was held at bay as long as is possible. This because if there wasn’t this project to occupy their desk, they really would have nothing else with which to justify their existence, and ongoing progress towards a tax payer funded index linked pension.
This all costs money, far more money than the original promoter had ever conceived to have been possible.
Business cases generally do not fail by large margins. It is general a percent here, or a couple of percent there. This percent is very often the additional cost of bureaucracy.
At this point the project stalls and gets into a spiral of decline. Consultants are now necessary in large numbers. Consultants are key to local authority staff survival. These staff do not have the expertise, and are trained not to go outside guidelines and policies. Above all they learn never to take a decision if you can possibly avoid it.
Here is where the consultant comes in. Not to take the decision, but to act as the lightning conductor for blame if you are forced to take the blsme.
The consultant has to bid in competition against others for the role. He has to bid low for the role. He makes a tiny margin on an hourly rate. His motivation is to increase the number of hours. He has to do this by stealth because it cannot be seen that they have caused the need for additional hours.
There are however lots of ticks in his armory to achieve not least of which is to provoke unhelpful interventions from other government stakeholder bodies.
This generates long and entirely pointless formalistic correspondence dancing around the point. With a bit of luck a £100k years commission can be spun into three years and a million. By now the original promoters of the project have lost all momentum, and have become discredited in the eyes of their own organisations, so they get retired early.
Yet this doesn’t destroy the project that has developed a zombie life of it’s own. It is too valuable as a source of work and funding from a whole series of parasites, hanging off its moribund structure.
The business plan is now no longer fundable by commerical loans. It is 10% out, and it becomes apparent that it will only be viable if government fills the gap, it has itself caused by its involvement.
This leads to yet more delay but generates yet more fees and work.
Here is where the politicians come in. They are desperate to fill the news agenda, but they are without funds with which to do it. What is the point of committing to a project that will take five years to build. Ministers are in power for two years at most, and governments five years. The man in the opening photo will not be you, but somebody else probably from another party.
This is where the zombie project comes in. Ten million looks like a lot of money to most poorly informed voters. In reality it is a drip in a rusty bucket it the scheme of things.
Big minsters are only big because they have big budgets, and more staff than their rivals. They need these projects to look big.
So that these ten % stakes can be spun into much larger investment figures.
Nearly all the projects on this lists are zombies. I and my colleagues in the contracting industry have been observing and repeatedly bidding for some of these companies for two decades or more.
Sometimes we win them like the A14, but even then they get stopped. It costs us £1 to 2 million by the time we win one. We are unlikely to win more than 1 in 4. A typical big UK contractor will turn over in excess of £600 million to make a return of less than £24 million.
It is hard to justify spending £2 million on a bid which would come out of the £24 million shareholder return.
As my generation of senior UK contractor has already been burnt by many of these same failed zombie projects and will be very reluctant to be burnt twice, most of these projects are dead in the water.
But that suits politicians. These projects would not be opened before 2017, and in many cases until 2021.
FROM THE FT:
Work oninfrastructure projects fell 13 per cent last year, despite the ongoing Crossrail project
George Osborne will come under renewed pressure this week to prove the coalition is delivering its infrastructure promises after an in depth Financial Times analysis showed slow, if not minimal, progress on many schemes.
In 2011, the coalition set out 40 “priority” projects covering roads, energy and telecoms –but only a handful of these have been completed. These include a clutch of small road improvements, including new junctions on the M1. Overall, road work has fallen by half over the past two years.
The analysis comes against the backdrop of work on infrastructure falling 13 per cent last year, according to the Office for National Statistics. In the third quarter it was 3.7 per cent down on a year ago, despite work on Crossrail, Europe’s largest construction project.”
“New infrastructure plan published by government
HM Treasury and Infrastructure UK
Published 4 December 2013
Achieving strong and sustainable economic growth
Autumn Statement 2013
The Rt Hon Danny Alexander MP and Lord Deighton
Insurance industry announces they will invest £25 billion in
as government publishes UK plan.
A new national infrastructure plan containing information on over £375
billion of planned public and private sector infrastructure investment
been announced by the government.
The plan sets out investment for energy, transport, flood defence,
water and communications infrastructure up to 2030 and beyond.
It comes on the day that six major insurers announce plans to
invest £25 billion in UK infrastructure over the next five years.
View our infographics for delivery so far and future delivery
Building on the announcement at the Spending Round 2013 of £100
capital investment in infrastructure projects, the government also
that it will:
sign an agreement with Hitachi and Horizon to support the financing of
development of a new nuclear power station at Wylfa in North Wales
UK guarantee, subject to final due diligence and ministerial approval
provide a further £50 million for a full redevelopment of the railway
station at Gatwick Airport
confirm strike prices for renewable energy, so that energy providers
how much they will receive for electricity generated in the future
take forward steps to convert public sector car fleets to electric
investing £5 million in a pilot during the year 2014 to 2015
fund improvements to the A50 around Uttoxeter starting no later than
confirm that there will be no tolling on the planned A14 scheme between
Cambridge and Huntingdon, construction of which is planned to start in
confirm that a UK guarantee has now been agreed for the £1 billion
Line extension to Battersea, unlocking a development the size of the
Olympics in the Nine Elms area
announce a £10 million guarantee for new energy efficient lighting
across car parks in the UK
create a new court for infrastructure to avoid unnecessary delays in
planning process for major projects
open a £10 million competitive fund in early 2014 to test innovative
solutions to deliver superfast broadband services to the most
reach areas of the UK. Options may include enhanced mobile services,
fixed technologies and alternative approaches to structuring financial
support, working closely with the communications industry
build on the Spending Round commitment of £2.3 billion capital
for flood defences by developing a new long-term plan, including
projects by Autumn Statement 2014
double the target for the sale of corporate and financial assets from
billion to £20 billion between 2014 and 2020, which could include the
government¹s shareholding in Eurostar
the government will also look at options to bring private capital into
Green Investment Bank to enable it to operate more freely in
aim to make the UK a world centre for the testing and development of
driverless cars. The government will conduct a review to ensure that
legislative and regulatory framework to support this aim reporting late
2014. It will also create a £10 million prize fund for a town or city
develop as a testing ground for driverless cars
The National Infrastructure Plan provides the visibility and improved
certainty industry has been looking for in order to commit to big
The Infrastructure Pipeline published alongside the plan is the most
comprehensive overview of planned and potential UK infrastructure
ever produced. It creates certainty for investors and the supply
allows government to work more effectively to ensure that the UK¹s
infrastructure needs are met.
It also acts as a prospectus for investors, identifying key UK private
public sector infrastructure opportunities.
Read the National Infrastructure Plan document
Chief Secretary to the Treasury Danny Alexander said:
The announcement today that six major insurers will invest £25 billion
the next five years is a massive vote of confidence in the UK economy.
supports the wider £100 billion public investment to rebuild Britain
the next seven years that I announced at the Spending Round 2013.
Underground, overground, on shore, offshore, wired or wireless, tarmac
train track. You name it, we¹re building it right now.
This is great news for the people of the UK because after years of
the UK¹s energy, road, rail, flood defence, communications and water
infrastructure needs renewal. It will boost the UK economy creating
making it easier to do business. It will also make the UK a better
live for everyone who calls it their home.
Commercial Secretary to the Treasury Lord Deighton said:
The fourth National Infrastructure Plan shows that the government is
delivering on infrastructure, with a long term strategy to make sure
tackles decades of underinvestment and gives us the infrastructure we
to compete in the global race.
Investment is increasing to around £375 billion over the coming years,
45% of our prospective infrastructure already under construction.
out government priorities with clear delivery milestones and reformed
planning rules to drive forward the most important projects, making
are building the strong, modern economy of the future.
Otto Thoresen, director general of the Association of British Insurers,
Insurers have a key role to play in contributing to the UK¹s economic
growth, as providers of long-term capital investment. Providing
infrastructure projects will help drive a competitive, healthy and
The future infrastructure pipeline, which only includes projects and
programmes worth over £50 million, shows that planned investment in
infrastructure has increased to over £375 billion from £309 billion
year. Of the 646 projects and programmes in the updated pipeline 291
already under construction.
Read the UK insurance growth action plan