Category Archives: infrastructure

This week’s media picks: infrastructure, Bangladesh safety, fracking, climate change, bioscience

FT (23/4/14): Leading article: Time to invest in Britain’s future

As the Prime Minister, David Cameron, and Chancellor, George Osborne, welcomed £36 billion investment in infrastructure projects, the Financial Times, remained to be impressed. In a leader, it said that one of the biggest and most persistent questions facing the UK economy is the worryingly low level of investment in infrastructure. Despite fine words, the government’s record is decidedly mixed, and the new set of initiatives may not match the scale needed to raise infrastructure spending to the level required. The FT outlines three areas of weakness in policy: 1) Spending is not high enough, and is persistently less than many of our competitors; 2) Given low interest rates, the government should borrow more to finance big projects; and 3) the government needs to establish a more stable and clearer framework for private sector investment.

Fibre2Fashion (24/4/14) Bangladesh Safety Accord on course, says UNI official

A year after the tragic collapse of the Rana Plaza factory building in Bangladesh, a demonstration of corporate social responsibility in action, rather than just words, is making progress towards improving the safety, prospects and lives of the country’s garment workers. Despite the many barriers to progress imposed by the political, social and commercial cultures of Bangladesh, the Accord on Fire and Building Safety in Bangladesh can be proud of its progress when it marks its own one year anniversary next month.

An official from, UNI Global, one of the two global union bodies that negotiated the Bangladesh Accord, Alke Boessiger, said: “The inspection program is in full operation. There is a strong team of more than more than 100 technical experts and engineers in Bangladesh who are conducting 45 inspections per week, with the aim to inspect 1500 factories by October.  More than 280 factories have been inspected for fire and electrical issues and 240 for structural safety.  Every inspection has revealed critical issues which must be repaired as a condition of doing business with signatory brands in the future. These issues include, for example, the absence of fire doors to separate the work area from the fire exit.  Brands are responsible to ensure that sufficient financial resources are available for the renovations and improvements.”

FT (24/4/14): Shale gas a multi-billion-pound opportunity for UK business

A report by EY, commissioned by the UKOOG, the shale-gas trade body, said that fracking shale gas could potentially generate 64,000 jobs in the oil and gas supply chain. It said that over the next 15 years, the UK would need to invest £17 billion on specialised fracking equipment and skills. This won’t mollify fracking’s opponents, but does at least show that the industry is seeking to make a positive, factually-based case for its development.

The Guardian (25/4/14): Kingfisher CEO warns on underestimating impact of climate change on business

In an opinion piece, Kingfisher plc CEO, Ian Cheshire urged business to sign a communiqué aimed at policymakers gathering in Paris next year for the UN Climate Change Conference. He warned that resource scarcity, energy price increases and extreme weather are real and growing threats to the long-term viability of business. That’s why hesigned the Trillion Tonne Communique, drawn up by the Prince of Wales’ Corporate Leaders Group, and is encouraging other business leaders to do so too. Adverse climate events are increasing costs for business, Kingfisher’s alone, were tens of millions of pounds, and as business doesn’t have a seat at the table, it needs more of them to sign the Trillion Tonne Communique to ensure that its voice is heard. 103 businesses world wide have signed so far, but it will require quite a few more to overcome the political resistance that clearly exists in some quarters.

FT (25/4/14): UK medical science drive shaken by US takeover fears

News that AstraZeneca was approached by Pfizer about a £60 billion takeover, has called into question the UK’s ambition to remain a leading global player in life sciences. AstraZeneca and GlaxoSmithKline are the only large companies with research and development operations in the UK. Oxford University’s Professor John Bell said: “If we were to lose one of them it would be a real blow to our capabilities. It’s a sector that is crucial to our future economic success. The news prompted Andrew Miller MP, Chairman of the House of Commons science committee to call for tougher standards to protect strategic UK assets, such as considering the national interest when looking at takeovers. Steve Bates, chief executive of the UK Bioindustry Association, pointed to successful smaller biotech companies, but said: “It is important to have whales in the ecosystems around which minnows can flourish.”

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This week’s media picks worth a read

We found these articles worth reading, you might too depending on your interests.

FT: Criticism of energy groups overshadows good news in [wind] sector

The changing view of the “big six” energy companies is symbolized by a recent Mirror front page headline that showed Centrica CEO, Sam Laidlaw as the “blackout blackmailer”. Commons energy select committee chairman, Tim Yeo, cannot remember energy being such a high-profile issue in his 30 years as MP. The CMA referral and the Tories proposed block on onshore wind farms have exacerbated fear in the sector. But Siemens’ Yorkshire wind turbine factory and the investment push by Dong, Statoil, Statkraft and Vattenfall show that “the big six are not the only game in town.”

FT:Labour vows to spread wealth away from London

In a little-noticed speech Ed Miliband confirmed Labour’s move away from the old regional development agencies as a means of generating growth in the English regions. Instead, the new local enterprise partnerships (LEPs) would be retained and the focus would be on cities, city-regions and partnerships of councils.

The Guardian:Government contractors begin to realise public trust is an end in itself
Jim Bligh, head of public services at the CBI, writes that the private sector is starting to recognise that building public trust is a worthy end in itself. The risks of not being transparent – of hiding behind bureaucracy or commercial confidentiality – far outweigh the risks of the alternative. Transparency ultimately shines a light on good performance and bad performance alike, which means that it can greatly improve the competitive dynamic. The losers will be companies and public bodies which simply aren’t performing well enough.

The New Yorker: Heartbleed: an example of ungovernability

You may not yet have heard of Heartbleed, the latest cyber-threat, but you are probably already a victim of it. The New Yorker reports on why one respected cryptography expert describes the threat of Heartbleed as 11 on a scale of one to ten. Was it on the Government’s cyber-crime radar? And even if it was, what can one Government do to tackle what is a global threat?

The Independent: Over here for the beer

A bevy of brewers is increasingly flocking to London from overseas. Discover why the English beer regulations make the capital the place to be for German and US brewers thirsty for innovation

The Independent: Erdogan: from model strongman to tinpot dictator

The Turkish premier’s decline into authoritarianism has dangerous geopolitical consequences.

Filling in potholes

In the 2010 Budget, the Chancellor of the Exchequer, Alistair Darling, promised £100 million to fill the nation’s potholes. But in case you think that this is the limit of his ambitions for investing in our economic infrastructure, he also published a strategy for securing as much as £1 trillion of investment in other holes in the fabric of the nation’s economy.

In the little-noticed Strategy for National Infrastructure, the Government outlined how it will attempt to secure the £40-£50 billion annual infrastructure investment needed over the next 20 years. There is a significant risk of a gap emerging in the funding of large infrastructure projects and, as I discussed in an earlier blog, the Government has established Infrastructure UK to address this.

If the £1 trillion is to be found and deployed effectively, it is important that businesses engage with the Government as it fleshes out its strategy.

The Government wants to stimulate investment, primarily from the private sector across five sectors that contribute directly to economic growth; energy, transport, water, waste and communications. This will cover assets such as waste treatment centres, rail, ports, roads, gas storage, recycling facilities, electricity generation and distribution, and telephone, TV and radio networks.

So far, the strategy is all about process rather than substance.

Infrastructure UK will manage the establishment of the proposed Green Investment Bank with public and private funding of £2 billion to invest in the low carbon sector with a particular focus on energy and transport projects. A consultation on this will be published in the summer.

And there’s more. There will also be a National Infrastructure Framework by the end of 2010 with departmental supply chain analyses; a report on the costs of large-scale civil engineering works by the end of 2010; an action plan on public-private interdependencies by 2011; and an Infrastructure Technology Strategy by 2011. Zzzzz…

The people drawing up this strategy clearly haven’t read my colleague Steve’s blog on why we take so much longer than the French to complete large infrastructure projects. And rather worryingly, the strategy document says that the Government will consider whether, not just how, to give longer-term certainty to public spending on infrastructure.

But at least it’s a start. The Government may be long on process but businesses involved in infrastructure provision should nevertheless engage with the policy makers drawing up these strategies and frameworks. Decisions will be made on investment priorities, changes to the regulatory environment and project financing. If nothing else, these initiatives give business the opportunity to put forward their views on what changes should be made across a whole swathe of policy to facilitate this investment.

A change of government won’t make any difference to this imperative as the need for investment in our infrastructure won’t end on 6 May. The holes need filling and that will require pots of money.

Don’t disengage because of the election

With the general election almost certain to be held on 6 May, businesses and campaign groups could be forgiven for thinking that there is no point in responding or examining final reports from Government and Parliament, as they will die a natural death when the election is called.

But that would be a mistake, as most of the issues and policy proposals being discussed will be resurrected under the new Parliament/Government. Issues such as climate change, energy security, social care reform, high speed rail, infrastructure investment and planning reform will not disappear just because there has been an election. These are long-term problems for which policy makers will still be seeking solutions after 6 May, regardless of which party is in power.

Government departments currently have live consultations on issues such as a new planning policy statement, taxation of insurance companies, Social Fund reform, retailers’ compliance with the groceries supply code of practice, the Renewable Heat Incentive and regulation of local bus services.

At the same time, Select Committees will shortly be publishing reports on a range of subjects such as the major road networks, the future of local and regional media, low carbon technologies, bioengineering and the end of cheques.

A Conservative government would strive ostentatiously to portray itself as different from the current administration. And if Labour is re-elected against the odds, it will want to show that it is making a fresh start. It will be new Labour without using the word ‘new’. So there will be changes to headline policies, and different approaches to tackling the fiscal deficit will have differing effects on expenditure on current programmes.

But many of the same macro- and micro-policy issues will still be unresolved. Policy proposals being put forward today by businesses will still be relevant after 6 May. If anything, the new administration may be more receptive to policy solutions that require a longer term view. Even though ministers are presently switching increasingly into election mode, officials will still be developing policy proposals, even if only to prepare for an incoming Conservative Government. They will still be receptive to a well-argued and persuasive case that enables them to offer solutions to their new ministerial masters.

Select Committee reports published over the next few weeks risk being ignored during the increasingly frenzied pre-election period. But they will still help set the agenda in particular policy areas by offering authoritative recommendations for policy makers. And they can still, potentially, be used by businesses and policy campaigners as independent justification for their own proposals.

It is easy to be distracted by the hurly burly of the election campaign but anyone seriously interested in affecting future policy needs to keep their eye on policy development right up until the end of this Parliament.

And then start all over again in the new one.

Government for sale

Watch out: the Government is on the scrounge. Ministers are looking for about £500 billion to invest in the UK’s infrastructure over the next ten years in areas like energy, water, transport and communications.

Given the constraints on public finances, the Government is looking to the private sector to fund this investment. The increased capital requirements on banks largely rule them out. This means that pension funds and insurance companies are seen as the more likely candidates to be approached with the ministerial begging bowl.

In his Pre-Budget Report last year, the Chancellor, Alistair Darling, established Infrastructure UK to identify and attract new sources of private sector investment in infrastructure. It will develop a strategy and list of investment priorities for the next five to 50 years to be announced in Budget 2010.  And now that various ministers have “gaffed” by stating the obvious that the general election will be on 6 May, this will definitely be Alistair Darling’s Budget and not George Osborne’s.

Infrastructure UK will be a heavyweight body. It will be chaired by former Rio Tinto chairman, Paul Skinner. But crucially it will be the focal point for the Government’s infrastructure strategy and advice. It will swallow up the Treasury’s PPP policy team and Infrastructure Finance Unit and those functions of Partnerships UK that support the delivery of major projects and programmes.

Ministers have already approached the pensions industry. But rather than expect to have their tummies tickled as they are asked to stump up for the Government, funds and insurance companies need to be clear about what they need in return. For instance, how will risk be shared, particularly during early construction phases? What can Ministers do to raise credit ratings that are often graded at BBB? And will insurers enter into negotiations only to find themselves hammered by new Solvency II rules from the European Commission that restrict their freedom to invest in large-scale infrastructure projects?

Ministers are also looking to sell £16 billion of Government assets by 2013-14, possibly by establishing new companies in which the public as well as pension funds would be offered shares. These disposals will be handled by the Shareholder Executive, which was set up by the Government in 2003 to carry out its role as shareholder. The Executive manages a portfolio of 29 businesses with a collective turnover of about £21 billion. These include esoteric parts of the public sector such as the QEII Conference Centre (currently staging the Iraq war inquiry), the Covent Garden Market Authority and the UK Hydrographic Office.

Early candidates for disposal include the Tote (again), the high-speed rail line to the Channel Tunnel, student loans and the Dartford crossing.

Any investor thinking about taking these off the Government’s hands will need to consider more than just the financial aspects. There are some potentially tricky stakeholder and industrial relations issues which new owners will need to address, particularly if the Government tries again to sell a stake in the Post Office or when it comes round to disposing of Northern Rock.

Investors will need to think through their messages and what they offer for customers/users, politicians, public sector unions and regulators. Failure to do so could lead to costly reputational damage. They may end up paying a lot more than they bargained for.