taking the long view: a new approach to infrastructure

Taking The long view: a new approach To infrasTrucTurecBi-urs infrasTrucTure survey 2014

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conTenTsForeword by Katja Hall, CBI 4

Foreword by John Horgan, URS 5

Overview – The stats that tell the story 6

The infrastructure landscape 9

The fourth CBI-URS infrastructure survey 12

Chapters

1. Positive progress in this parliament is yet to translate into business confidence 16

2. Political barriers risk preventing us from closing the gap on our rivals 24

3. Where we are seeing breakthroughs, politicians must stick with the plan 30

Rail – Investments currently being made are starting to pay off

Digital – Retain our current advantage through a long-term, cross-party strategy

4. We can’t duck the big decisions that need to be made 38

Roads – Without a national debate on road funding reform, business sees a bleak future

Aviation – Indecision on new runway capacity is already impacting business investment

5. Deliver messages that reinforce rather than restrict future confidence 46

Energy – After the success of EMR, rhetoric now risks investment

6. A new approach is needed to boost our ability to take the right decision, at the right time. 50

References 58

4 Taking the long view: a new approach to infrastructure cBi-urs infrastructure survey 2014

katja hallforeword

This year’s infrastructure survey comes at an opportune moment

for reflection, half a year out from a general election. After

much hard work and sacrifice, the UK’s economy is now on firm

ground, providing solid foundations upon which we can build.

We now need to ask ourselves the question: what kind of economy

do we want, and how do we get there?

Knowing where we should be heading is the easy part. We need to see a rebalancing of our economy towards investment and exports. Getting there in practice however is going to be much harder, and requires us to take some tough, long-term decisions. This means the coming election is not just about the next five years – it is about the next fifty.

Nowhere is this truer than for our infrastructure. Quality, affordable networks will be instrumental in achieving our goals, but change doesn’t happen overnight. This means we need a long-term vision that delivers what we need, when we need it. Too often in the past, however, short-term politics has got in the way.

This is why this year’s survey is so important. With an opportunity to set ourselves on the right path, the survey shines a light on business’ perceptions of the big infrastructure challenges we simply cannot afford to ignore for the long-term health of our economy. It sets the agenda for the incoming government, as well as reflecting on our current efforts – where we are getting things right, and where we need to see change.

Looking back over this parliament, there is no doubt that businesses have appreciated the efforts made to put in place policies that will help infrastructure investment thrive. The National Infrastructure Plan, the UK Guarantee Scheme, reforms to the Highways Agency, Electricity Market Reform, pro-growth planning reforms – the list goes on. The impact is clear to see: since our first survey in 2011, the UK has become a more attractive location for investors.

What is worrying however is that businesses still don’t see significant improvements in mission-critical parts of our infrastructure – and don’t expect

to any time soon. Rumours of renationalisation of the railways, moratoriums on new airport capacity and mixed-messaging on renewable energy do little to indicate to business that politicians have infrastructure improvements high up their agendas. All the while, the UK still requires £100bn investment in energy, a new runway in the south-east by 2030 and a new approach to address an £8bn shortfall in funding for the strategic road network.

It’s no wonder that confidence in the future remains low.

We need a new and better way of making important decisions about our infrastructure. That 89% of businesses want to see an independent infrastructure commission, as proposed by Sir John Armitt, is a stand-out statistic for me. It signifies a broader call for a new politics of infrastructure, helping to set out a long term vision which is not hijacked by every electoral cycle and can give investors much more confidence.

Businesses overwhelmingly want to see positive, bold messages in party manifestos, demonstrating an appetite to make the right kind of difference to our long-term economic outlook.

This new approach can help turn good policies of the last five years into spades in the ground and progress on the ground for the next fifty.

Katja Hall Deputy director-general, CBI

5Taking the long view: a new approach to infrastructure cBi-urs infrastructure survey 2014

foreword

John horgan

Infrastructure is woven into the fabric of history. From Roman

roads to the engineering feats of Bazalgette and Brunel, or the

Freeways that brought prosperity to the US in the 1950s and 60s,

inspired by the German Autobahn network seen by President

Eisenhower in World War II – infrastructure has long played a

decisive role in improving the way we live, travel and do business.

Dwelling on the milestones of past will not secure our future, however. At a time when the UK is facing uncertainty over long-term security of energy supply and real concerns about short-term generating capacity, we have no option but to plan ahead. Much of the UK’s most vital infrastructure urgently needs upgrading so it can cope with the expanding population, the impact of climate change and an increasingly globalised world.

In the Victorian era our infrastructure provided the backbone for economic growth – now, as this year’s CBI-URS Infrastructure Survey shows, the perception is that we are lagging behind our economic peers. Despite some high-profile success stories in recent years and the current government’s strong commitment to future projects such as HS2, the UK is falling behind many of the countries with which we compete for foreign investment.

This is why, six months ahead of the general election, the UK is at a crossroads. Politicians from all parties have a real opportunity to take decisive action that will transform the country for the better. For too long the country’s infrastructure has played second fiddle to changing political priorities, with every new government bringing a different agenda. Much of the infrastructure on which we are so dependent today urgently needs an overhaul. Now is the time to be as bold in our vision as our Victorian forebears.

For this to happen, infrastructure decision-making must change. The CBI-URS Infrastructure Survey provides clear evidence of the appetite for a new approach to infrastructure planning and delivery. Business is calling for a long-term approach to infrastructure that extends beyond the five-year electoral cycle. We want to see the establishment of an independent body to assess

and plan the UK’s infrastructure needs. While originally championed by Sir John Armitt, a broader consensus is now emerging as politicians across the spectrum recognise the compelling benefits of this vision. Imagine the impact of a long-term, holistic approach that married national and local needs, integrating road, rail, aviation and ports. Imagine a strategy that enabled capacity to be one step ahead of demand.

Ending the stop-start approach to infrastructure investment would have a profound impact on the UK’s construction industry, from infrastructure operators through to small, specialist companies in the supply chain. Decades of uncertainty about the longevity of funding and demand have led to today’s engineering skills shortage. A longer term approach to infrastructure planning would give industry the confidence to recruit and develop the vital skills required to deliver complex, transformational projects. After all, we need to invest in the engineers, environmental scientists, planners, surveyors, architects, financiers and construction experts of the future – professionals who will work collaboratively and confidently with government to deliver the innovation the UK needs to secure a leading position in the global marketplace.

John Horgan Managing Director, Europe, Middle East, Africa and India, URS


overview – The stats that tell the story

1 positive progress in this parliament is yet to translate into business confidence• 99%offirmssaythequalityorcostof

infrastructure has a significant impact on their investment decisions, so it is important infrastructure remains high on the political agenda.

• Coalitionpoliciestoboostinfrastructureinvestmentin the last four years have been overwhelmingly positive, with 70-80% of infrastructure providers viewing the UK Guarantee Scheme, National Infrastructure Plan (NIP) and planning reforms as positive steps.

• Yetconfidencethatthesedevelopmentswilltranslate into better infrastructure on the ground is low with almost two-thirds of firms saying energy is deteriorating, and over half seeing the same in transport.

• Nordoesthefuturelookbright:67%and57%expect energy and transport to worsen in the next five years, meaning business expects a decade of decline in key areas.

• With91%offirmsrankingdigitalnetworksasakeyfactor in investment location, UK digital is a bright spot, as 89% have seen improvement since 2009 and 70% expect this to continue.

2 political barriers risk preventing us from closing the gap on our rivals• KeypiecesoftheUK’sinfrastructureareviewedas

internationally weak, with energy and transport seen in a negative light when compared to our rivals.

• Worryingly,thequalityofourinfrastructurefaresparticularly badly against some of our biggest rivals: Australasia, North America and the EU.

• What’smore,businessdoesn’tthinkweareclosingthisgap.In2011,59%ofcompaniessawinfrastructure in EU countries as better than in the UK;in2014,thishasgrownto61%.

• TheUKunderinvestsincapitalspendrelativetoother developed economies, so 99% of firms want to see levels raised in line with the G20 average to at least stem the tide.

• Ifwearetoactuallyclosethegap,theUKwillneedto be a stand-out location for private infrastructure investment. While ranking above the EU as an attractive location, we currently lag behind North America and Australasia.

• Themostsignificantfactorsthatbusinessseesas stopping us from attracting more private investment are overwhelmingly political. 71% of providers view political uncertainty as significantly discouraginginvestment,and54%believepoliticalrhetoric is a major barrier.


3 where we are seeing breakthroughs, politicians must stick with the plan

rail – investments currently being made are starting to pay off

• Investmentsintherailnetworkarepayingoff–abalanceof+46%and+19%haveseenimprovements to metro and intercity rail services in the last five years.

• Businessbacksthecurrentregimetocontinuedelivering improvements. This year, for the first time since the survey began, commuter rail is expected to improve.

• Thereisoverwhelmingsupportforthesystemoffranchising and Network Rail’s plans to deliver significant investments into the future.

• Bigprojectsalsonowhavewiderbacking,with59%supporting delivery of HS2, even if 70% feel there is still a greater role for government in making the case for new investments.

Digital – retain our current advantage through a long-term, cross-party strategy

• Theimportanceofdigitalnetworksisontherisefor businesses of all types, with increases in the importance of these networks found in all sectors in just one year since the 2013 survey.

• DespitebeingaUKstrength,businessdissatisfaction with current networks is still too high. 48% of all firms and 71% of those in the IT sector are dissatisfied with current provisions.

• BusinessisparticularlyconcernedabouttheUK’smobile broadband coverage, demonstrated by the factthat67%offirmsratecurrentcoverage as inadequate…

• …andwith55%offirmsseeingalackofaccesstosuperfast broadband as inadequate, it is clear we must do everything possible to maintain the pace of investment.

4 we can’t duck the big decisions that need to be made

roads – without a national debate on road funding reform, business sees a bleak future

• UKbusinessseestheroadnetworkcontinuingtodeteriorate.MorethanhalfofUKcompanies(52%)report a worsening of motorways in the last five years,and65%seethesameinlocalroads.

• Thefutureisseenasequallybleak,with77%and86%ofrespondentsexpectingmotorwaysandlocal roads to get worse or stay the same over the coming five years.

• But39%areconfidentthatHighwaysAgencyreform will have a positive impact – a figure that increasesto45%amonginfrastructureprovidersand construction firms.

• Still,80%offirmsremainconcernedaboutwhereinvestmentfornewroadsiscomingfrom,with86%of all business leaders in the survey now backing greater private investment in the road network.

aviation – indecision on new runway capacity is already impacting business investment

• Businessesseedirectairlinkswithhighlevelsof frequency as key determinants of their travel decisions: with 74% seeing the direct routes as importantand66%prioritisingfrequency.

• Whilelinkswithestablishedmarketsremaincritical, emerging markets are not far behind. 64%offirmsseeairlinkswithNorthAmericaasimportant, but just 7 percentage points behind is China(57%).

• Linkstoestablishedmarketsaregood,with+69%and+68%offirmspositiveonbalancewithlinkstotheEUandNorthAmerica.YetforChina(+22%),India(+15%)andBrazil(+14%),satisfactionis much lower.

• Withrunwaycapacityquicklyrunningoutinthesouth-east,46%offirmsinLondonsaythatindecision on new capacity is already impacting investment decisions. As a result, 92% want to see politicians implement the Airports Commission’s finalrecommendationsinsummer2015.


5 politicians must deliver messages that reinforce rather than restrict future confidence

energy – after the success of eMr, rhetoric now risks investment

• Energyismissioncriticaltobusinesscompetitiveness, as three-quarters of companies consider reliability and cost significant factors in choosing where to invest.

• ConcernsthattheUKisnotattractingtheinvestmentneeded for the future have steadily eroded business confidence that supply will improve, with a balance of -34% of firms expecting improvement in 2012, -54%in2013andnowin2014,-67%.

• 80%offirmssayfearsaboutfutureenergysecurityare being factored into their investment decisions now, while 74% say the same about fears of higher costs.

• 95%ofbusinessessayelectricitymarketreform(EMR) will improve investment in energy, so with the right measures in place, it is essential that political rhetoric encourages rather than stymies this investment.

6 a new approach is needed to boost our ability to take the right decision, at the right time• Businesswantstoseeallpartiescommitto

bold action in manifestos, including backing for rail franchising and Network Rail’s investment programme (99%), commitment to implement the Airports Commission’s findings (92%) and long-termroadfundingreform(86%).

• Inthelongrun,businesswantstoseeanewapproach to infrastructure, with 89% backing the creation of an independent body to assess the UK’s long-term future needs. In this framework, 99% of business feel it would have been easier to make the case for HS2 successfully.

• Businessisalsosupportiveofgreaterlocalinputoninfrastructurespending,with86%infavourof greater spending power for local enterprise partnerships (LEPs) and 73% for local authorities.

• It’snotjustpoliticsthough:businessbelievesmoreaction is needed to attract a range of commercial investors (92%), to improve commercial awareness in government (92%) and to tackle delays in planning (91%) to get projects moving.

• 97%ofcompaniesfeelthatamoreattractivecapital allowances regime would boost private appetite for infrastructure investment – something that could be delivered within this parliament.


The infrastucture landscape

Our economy is finally back on its feet, but now is not the time for complacency.

It is essential we equip ourselves with the right tools to deliver the sustainable

future we want to see in the UK, and in this context, addressing the UK’s long-

term infrastructure challenges must be near the top of our to-do list. Things

have moved in the right direction in recent years, but with an election on the

horizon, business is asking if we have yet seen the decisive leadership capable

of setting our infrastructure delivery on a new trajectory.

under this government, our infrastructure ambitions have soared…The cuts in capital spending of 2010 seem like a long time ago now. While the need to reduce the deficit continues to loom large, spending on infrastructure has been on the rise during this parliament – from £45bneachyearin2010-2013to£50bnin2014-15,with pinch-points in digital connectivity and the road network seeing particular attention.

Even more encouraging is the gusto with which the government has worked with industry to design new structures capable of channelling a steady stream of investment into our infrastructure. The introduction by Infrastructure UK (IUK) of innovations such as the UK Guarantee Scheme has made a positive impact – helping to bolster £14bn of much needed investment for the construction of Hinkley Point C, among other schemes. The Infrastructure Bill is on track to reform the Highways Agency, helping put an end to the stop-start cycle of funding for the road network. Planning has also seen positive change as the National Planning Policy Framework’s (NPPF) pro-growth principles begin to slowly bed in.

What’s more, longer-term plans in the 2013 Spending Round demonstrate a continued level of ambition across the next parliament. This has allowed the government to make a number of bold pledges – from the construction of major transport links such as HS2, to the trebling of planned investment in major road upgrades by 2020-21.

Key achievements since 2010

• October2010–FirstNationalInfrastructureplan launched

• March2012–NationalPlanningPolicyframework created

• July2012–UKGuaranteeSchemeintroduced

• December2012–Reformstopublicprivatepartnerships, as pf2 starts

• July2013–UKGuaranteeSchemeextendedto 2016

• November2013–HS2HybridBillentersparliament

• December2013–EnergyBillreceives royal assent

• July2014–InfrastructureBillintroducedtoreform the highways agency


…yet without a clear future pipeline of projects, business remains worried about the speed of deliveryThese announcements give the impression that the right actions are being taken to ensure the UK’s infrastructure needs will be met. The reality on the ground, however, has been a mismatch of expectations – the confidence built up by politicians through high-profile announcements is quickly undermined by the hard truths about the time and complexity of delivery. With political uncertainty on key upgrades growing – such as future airport capacity – it is understandable that many businesses feel deflated by progress.

This limited improvement is borne out in the data too. The UK now fares little better by international comparison than it did in 2011 when the CBI first ran this survey. At that time, our overall global ranking for quality of infrastructure was 28th according to the World Economic Forum (WEF) Competitiveness Report, just one place down from the 27th position that we find ourselves in now, and still well below our main rivals – not to mention countries such as Oman and Barbados.

What’s worse is that our most serious challenges are becoming more acute as time moves on. The UK’s road network has dropped two places to 30th in the WEF rankings in the last year alone – below countries such as Namibia and Puerto Rico2. Our electricity capacitymarginforecastforthewinterof2015isuncomfortably low, having dropped to just 2% from 4% in 20123. In the last five years, our competitors have opened up new air links to Chinese destinations suchasXiamen,Wuhan,HangzhouandShenyang–links which are not provided at all from the UK. These examples only compound the anxiety in the business community that the UK is falling behind.

with an election on the horizon, business only sees more risk of delayTime is running out for this government to finish the job. While it is important that legislation such as the Infrastructure Bill reaches completion, minds are already turning towards the election and the promises to be made in manifestos.

On the one hand, companies feel the big questions on their risk registers are going unanswered. The UK needs new runway capacity and yet having set up the Airports Commission to find a solution, some members of this government have stopped short of backing it. We also need an answer to the £8bn black hole in funding that has built up in our strategic road network4 – yet talk about long-term reform seems to have been relegated to the ‘too difficult’ box, with politicians somewhat reluctant to engage.

Where tough decisions have been taken to unleash private investment, headline-grabbing rhetoric is instead alarming investors. Despite the Energy Act receiving a huge parliamentary majority, some politicians are jeopardising investment with promisesofpricefreezesandmixedmessagingonrenewables. Meanwhile, on the rail network, hints of partial renationalisation under a new government risk undermining a system currently making up for decades of underinvestment – while also now delivering substantial improvements in passenger satisfaction.

27thUK ranking for quality of infrastructure according to World Economic Forum


Business wants to change the politics of infrastructure – setting us on a new competitive trajectoryBusiness is now looking to all political parties to set out their own vision for the UK’s infrastructure in election manifestos. Companies want to see politicians playing their part in tackling the big, divisive issues, such as runway capacity in the south-east and road reform, demonstrating restraint in areas like energy, where rhetoric could put new investment at risk. Where we are getting things right, as with digital and rail, companies want to see commitment to sticking with what’s already working.

In the long run however, business wants to see the politics of infrastructure fundamentally change in order to improve perceptions of the UK as a place to do business and deliver the networks the country needs to prosper. We need a new approach that delivers a clear picture of what the UK needs, when and where, providing investors with the confidence to finance and build the infrastructure for our future success.

CBI priorities for the next parliament and beyond:

1 establish an independent body to determine future infrastructure needs and how they should be met, without delaying projects already underway.

2 Boost infrastructure investment by introducing capital allowances for structures and buildings.

3 implement all elements of electricity Market reform to secure the necessary levels of investment in our power sector, and ensure energy efficiency is an infrastructure priority.

4 commit to implementing the recommendations of the airports commission to bring an end to the hiatus over uk aviation capacity, with spades in the ground for a new runway by 2020.

5 spark a national debate on the future funding of the uk’s road network by conducting an audit of the network, providing a clearer picture of the current funding deficit.

6 provide long-term investment certainty for digital infrastructure by committing to carry through the digital strategy currently being formulated.

Business wants to see the politics of infrastructure fundamentally change in order to improve the perception of the UK as a place to do business


The fourth CBI infrastructure survey, now run in partnership with URS,

provides an authoritative snapshot of business perceptions of the state of the

UK’s infrastructure networks in 2014 and priorities for the years ahead. Since

the inaugural survey in 2011, infrastructure has come to play an increasingly

central role in the coalition government’s drive for economic growth, so with

an election on the horizon, this year’s survey is an ideal opportunity to assess

the progress made.

The results provide a business assessment of the quality, affordability and competitiveness of the UK’s infrastructure networks compared to other leading economies and highlight where UK business wants to see investment. With private sector investment in infrastructure essential to future improvement, the survey also reviews the infrastructure landscape from an investor perspective, identifying the barriers still to be addressed.

conduct of the surveyThe survey was conducted over a three-month period ending August 2014, with responses received from 443 participants. The respondents were senior executivesfromcompaniesofallsizes,spanningallmajor sectors of the economy and all parts of the UK. Infrastructure investors, providers and users all took part in the survey, so the responses provide an assessment of the UK’s infrastructure from a variety of different angles.

respondents from all sectors of the economy took part…Companies across the economy responded to the survey (Exhibit 1). Grouped by broader sector type, the largest category of respondents came from service sectors(79%),followedbyproductionsectors(15%).Inthe analysis of the results responses were weighted according to the sectoral contribution to Gross Value Added based on the latest available Office of National Statistics estimates. Responses were also analysed by firms that classed themselves as infrastructure providers and those that were solely users. Almost a quarter (23%) of those taking part in the survey said their company was primarily a provider of infrastructure (Exhibit 2).

The fourth cBi-urs infrastructure survey

Exhibit 1 respondents by sector (%)

Agriculture 1% Construction 6%

Finance & insurance 8%

Gas & electricity 1%

Information& communications 7%

Mining & quarrying 2%

Manufacturing 10%

Professional &support services 12%

Real estate 11%

Transportation& storage 4%

Water & waste 1%

Wholesale, retail& leisure 14%

Other services23%


…and from all regions of the ukMost respondents were companies with operations in more than one region of the UK, with close to half (44%) reporting that they operated in all regions. To establish a clearer picture of the regional spread and presence of participants, the survey asked respondents where the company’s core business was primarily based (Exhibit 3). Nearly a fifth (19%) reported they had no primary regional base, but among those citing a primary region the most commonlocationwasLondon,accountingfor25%ofthe sample.

Exhibit 2 infrastructure providers (%)Exhibit 3 primary location of respondents by region (%)

Primarily infrastructureproviders 23%

Primarily infrastructure users 77%

East of England 3%East Midlands 7%

London 25%

Northern Ireland 3%

North east 2%

North west 4% Scotland 8%

South east 9%

South west 3%

Wales 7%

West Midlands 5%

Yorkshire& Humber 5%

No primary region19%

443senior business leaders took part in this year’s survey


Exhibit 4 respondents by uk workforce size (%) Exhibit 5 international presence of companies (%)

0-49 27%

50-24916%

500-4,99929%

5,000+ 15%

250-499 13%

UK only 73%

1-50 othercountries 7%

More than 50other countries 20%

…with many participants operating in more than 50 countriesMore than one in four participants (27%) had operations in other countries in addition to the UK (Exhibit 5), with oneinfive(20%)operatinginmorethan50countries.With international operations on this scale, respondents were well placed to assess how the UK’s infrastructure compares with that of other economies.

companies of all sizes took part…Companiesofallsizes,measuredbynumberofemployees, participated in the survey (Exhibit 4). Largerfirmsemploying500-4,999employeesconstituted the biggest group, making up more than a quarter of all respondents (29%). Small companies with under50employeesrepresentedthesecondlargestgroup, also making up over a quarter of the sample (27%). In all, 43% of the total sample were SMEs on the officialdefinitionofbusinessesemployingunder250people.


chApter 1

positive progress in this parliament is yet to translate into business confidence

During the course of this parliament, we’ve seen a steady stream of positive

moves to boost infrastructure investment. From the introduction of the

National Infrastructure Plan, highlighting some £383bn6 worth of projects

for delivery, to reform of the major infrastructure planning system,

progress has been steady.

With infrastructure such a key determinant of business investment location, it is worrying that we’ve seen little change in business perceptions since 2011. In priority areas of concern to business, such as transport and energy, confidence in the future remains frustratingly low.

key stats• 99%offirmssaythequalityorcostof

infrastructure has a significant impact on their investment decisions, so it is important infrastructure remains high on the political agenda.

• Coalitionpoliciestoboostinfrastructureinvestmentin the last four years have been overwhelmingly positive, with 70-80% of infrastructure providers viewing the uk guarantee scheme, national infrastructure plan (nip) and planning reforms as positive steps.

• Yetconfidencethatthesedevelopmentswilltranslate into better infrastructure on the ground is low with almost two-thirds of firms saying energy is deteriorating, and over half seeing the same in transport.

• Nordoesthefuturelookbright:67%and57%expectenergyandtransporttoworseninthenextfiveyears,meaningbusinessexpectsadecadeofdecline in key areas.

• With91%offirmsrankingdigitalnetworksasakeyfactor in investment location, uk digital is a bright spot,as89%haveseenimprovementsince2009and70%expectthistocontinue.

with infrastructure essential to investment, confidence in future improvements can drive growthThe recovery is now well-set, with UK GDP expected to surpass its pre-crisis peak in the second quarter 2014 results, and suggests business investment is starting to put in a good showing7. We now have the platform from which to build a sustainable economic future; however, we must safeguard against complacency – there are still plenty of risks that could throw us off track.

Against this backdrop it is more important than ever that the UK has infrastructure which is reliable, cost-effective and sufficiently robust to cope with our future demand. Infrastructure is continually cited by businesses as a key determinant of their investment decisions – whether the air freight that helps them compete for international export opportunities, the digital networks that boost productivity by allowing staff to work seamlessly on the go, or the roads and rail that are relied upon to get people and goods from A to B.

This year’s survey underlines just how important this perception is for private sector investment decisions. 99% of firms in the survey this year say that quality or cost of one or more of the infrastructure classes is either significant or very significant in their investment decisions, with varying levels of importance on different classes (Exhibit 6).


While all infrastructure classes score highly, the survey gives us a strong sense of priority, with the most important investment considerations attached to communications, transport and energy. What’s more, for the first time this year, the quality and reliability of digital and broadband networks are the most significant factor, highlighting the revolutionary

0 20 40 60 80 100

Cost

Quality and reliability

Flood defences

Cost


Communication

Cost


Waste

Cost


Water

Cost


Transport

Cost


Energy

Very significant Significant Not very significant Not at all significant

33 42 20 5

38 38 20 4

50 38 10 2

38 39 20 3

12 21

53 14

13 35 41 11

11 25 52 12

11 36 43 10

35 41 21 3

61 30 7 2

7 17 42 34

9 28 38 25

Exhibit 6Significanceofquality,reliabilityandcost for business investment (%)

say that quality or cost of one or more of the infrastructure classes is either significant or very significant in their investment decisions99%

impact technological development is having on demand, with a growing dependency across all sectors of the UK economy. At the same time, all infrastructure types have increased in significance since the results of 2013 (Exhibit 7), serving to underline the influence that the right calibre of infrastructure can have on inward investment, especially as firms look to grow as the economy improves.

Exhibit 7Businessesratingqualityandreliabilityof infrastructure as significant for their investment decisions (%)

2014

2013

0 20 40 60 80 100

Waste

Water

Energy

Transport

Communication

91

80

88

85

75

70

48

41

47

39


This government has made a positive difference to the infrastructure landscape…

Over the course of this parliament, the policy landscape for infrastructure has been slowly overhauled, putting in place a range of institutions and programmes designed to support, simplify and speed up the delivery of infrastructure in the UK. From innovations such as the NIP, the National Planning Policy Framework (NPPF), the UK Guarantee Scheme and the Green Investment Bank, Infrastructure UK should be applauded for its efforts to get projects up and running (Exhibit 8).

uk guarantees scheme

providing government underwritten financial guarantees for infrastructure projects, the scheme hassofarbeenusedtosecureinvestmentfor£1.4bn,includingtheconversionofDraxPowerPlanttobiomass,theNorthernLinetubeextensionandtheMerseyGateway.Now,withtheapprovalofstateaid,ithasbeenextendedtosupport£14bnofconstructionriskforHinkleyPointCnuclearplant, demonstrating the key role government can play supporting major infrastructure over the line.

Major infrastructure planning unit

in 2012 the planning inspectorate’s Major infrastructure planning unit was created to speed upconsentsformajorprojects,deliveringquickerdecisionswithmuchclearertimelines,andproviding greater assurances for investors. projects that have gained consents through this new system already include Brechfa forest west wind farm in wales, east anglia one offshore wind farm and Daventry rail freight Terminal.

national infrastructure plan (nip)

responding to calls for greater visibility of the uk’s pipeline of projects, the latest iteration of the nip in 2013 sets out plans for 270 projects worth some £383bn of investment, of which over £40bnisexpectedtobedeliveredby2016.Witheachyear,thedetailintheplanhasincreased,with revenue streams and project time scales set out, although business still sees room for improvement – particularly in prioritising a small number of key schemes.

national planning policy framework (nppf)

since March 2012 the nppf, which provides a simple framework for local planning decision-making in a single document, has helped shape a more pro-growth approach, but it is too early to gauge the real impact. while the changes are starting to impact on appeal decisions, the effects at local level are still less pronounced, so further embedding of nppf principles in all local plans will help deliver better outcomes for local communities and businesses.

Exhibit 8Examplesofgovernmentinnovationssince2010

These innovations are not just good ideas – businesses and infrastructure providers alike have welcomed them in practice, viewing them on the whole as either positive or very positive (Exhibit 9).

Scoring most highly is the UK Guarantee Scheme, in a year that has seen the scheme used to support construction of Hinkley Point C, as well as other major projects such as the Mersey Gateway. Second on the list, but highest for infrastructure providers, is the NIP, suggesting that with greater detail on investment opportunities in recent iterations, the NIP is becoming an increasingly useful point of reference.


Reforms to planning for major infrastructure projects have also made significant waves, with innovations such as a Major Infrastructure Planning Unit inside the Planning Inspectorate and the NPPF scoring highly with all firms – but particularly construction firms, of which 100% of respondents view the latter as a positive step. On almost all the schemes, however, the majority of businesses are supportive that the actions taken had delivered a positive impact on the UK’s attractiveness as an investment location – an impressive track record from this government.

What remains concerning, however, is the general awarenessoftheseprogrammesandschemes.52%of infrastructure providers say they are not aware of theNIP,58%havenoknowledgeoftheUKGuaranteeSchemeand59%areunawareofPF2.Whilelowlevels of awareness among the average business might be expected, that the schemes are visible to only a limited number of infrastructure providers, despite being so warmly welcomed by those in the know, suggests that action here could reap rewards. As a result, there is a role for government, along with industry groups and businesses, to raise awareness and understanding so that we derive the greatest possible return on these initiatives.

Very positive Positive Negative Very negative

0 20 40 60 80 100

UK industrial strategy

Green Investment Bank

National Infrastructure Plan

Pension Infrastructure Platform (PIP)

PF2

UK Guarantee Scheme

Major Infrastructure Planning Unit inside the Planning Inspectorate

National Planning Policy Framework

All6 60 27 7

7 67 17

7 66 27

9 82 9

9

10 77 12 1

17 70 11

18 64 18

2

5

5

58 34 3

66 22 7

8 53 32 7

3 69 21

14 72 14

17 71 12

29 53 18

7

10 56 24 10

8 65 19 8

14 49 29

17 67 16

8

3 75 3 9

50 42 8

57 29 14

38 50 12

6 58

11 89

36Providers

Construction

All

Providers

Construction

All

Providers

Construction

All

Providers

Construction

All

Providers

Construction

All

Providers

Construction

All

Providers

Construction

All

Providers

Construction

Exhibit 9 impact of policies on appetite of investors for uk infrastructure (%)

52%infrastructure providers report that they are not aware of the National Infrastructure Plan


1%Firms who see transport as having significantly improved in the last five years

…yet confidence that infrastructure is improving on the ground has budged little since 2011…With such a positive record, it may seem surprising that the business perceptions captured in this survey suggest firms think many of our key networks are still deteriorating. The great majority consider the UK’s energy and transport networks and flood defences to have worsened over the past five years (Exhibit 10) – particularly worrying given the importance attributed to energy and transport in investment decisions. More positively however, a large majority view our communications and waste infrastructure as having improved in the last five years, while a slim majority have seen improvements in water.

Communications infastructure has seen considerable improvement in particular, with some 89% now seeing networks as better than in 2009, reflecting the pace of change. The period has seen not only the rapid expansion of superfast broadband, but also the introduction of 4G mobile networks, demonstrating that the UK has managed to keep pace with these technological changes, even if business expectations of these networks have grown alongside them.

Exhibit 10 Business perceptions of changes in the qualityofinfrastructureoverthelastfiveyears(%)

Exhibit 11 improvements across passenger transport networks over last five years (% balance)

Improved significantly Improved slightly

Deteriorated slightly Deteriorated significantly

0 20 40 60 80 100

Flood defences

Communications

Waste

Water

Transport

Energy2 36 45 17

1 40 41 18

4 47 40 9

11 63 23 3

16 73 7 4

5 36 39 20

-60 -40 -20 0 20 40 60

Interconnectivity of transport networks

Ground transport links to UK airports

International air links

Domestic air links

Cycling networks

Local road networks

Motorway road network

Commuter rail network

Intercity rail

Bus and coach networks

Tube/metro/tram networks+55

+57

+17

+3

+16

+19

-7

-34

-57

-5

-2

Firms’ assessments of transport paint a mixed picture (Exhibit 11). Tube and metro networks, as well as intercity rail, score highly, with significant positive balances. By comparison however, respondents overwhelmingly agree that the UK’s motorways and local road network continues to deteriorate.


Exhibit 12 Business perception of change across infrastructure classes in the last five years, 2011 vs 2014 (%)

Improved significantly Improved slightly

Deteriorated slightly Deteriorated significantly

0 20 40 60 80 100

2011

2014

Communications

2011

2014

Waste

2011

2014

Water

2011

2014

Transport

Energy

2011

20142 36 45 17

2 22 66 10

4 47 40 9

2 45 46 6

11 63 23 3

4 66 25 5

16 73 7 4

15 78 5 2

1 40 41 18

25 58 17

On air transport in particular, there is a divergence in business opinion. A small positive balance of businesses (+17%) think the UK’s international air links have improved in the last five years, but a small negative balance (-2%) feel domestic air connections are now worse than in 2009. When the overall picture is compared against responses from London-based businesses, there is a clear difference. Businesses in London view international air links as having deteriorated on balance (-1%), demonstrating that the current lack of airport capacity in the south-east is already having a detrimental impact when compared to changes seen in the rest of the country.

While the long timeframes required to deliver major infrastructure upgrades mean a complete turnaround in opinion in four years is unlikely, a comparison of business perceptions in 2014 and 2011 demonstrates worryingly little progress – in infrastructure classes perceived as moving in the right direction, and in those viewed as deteriorating (Exhibit 12). Firms seeing significant improvement or deterioration in key areas have remained stubbornly the same, although we have seen a small increase in the numbers seeing moderate improvement.

Comparison of business perceptions in 2014 and 2011 demonstrates worryingly little progress


…and business remains sceptical about the nextfiveyearsLastyearwhensurveyed,just35%ofbusinessesthought that the coalition’s policies would make a positive difference over the coming five years, and this year’s survey gives little cause for optimism. Respondents remain worried that the current course of action is insufficient to deliver the improvements we need to see.

Firms expect almost all major infrastructure asset categories apart from digital to become worse, including water and waste, which have been seen to be moving in the right direction in recent years. The grimmest outlook is predicted for the energy sector,withovertwo-thirdsofbusinesses(67%)expectinginfrastructuretoweakendespitethesizableinvestment flows into our energy grid and generation

in recent years (Exhibit 13). Confidence that transport infrastructure will improve is also low – 57% expect it to worsen.

For the UK’s road networks, a balance of -38% and -23% of firms on local and motorway networks respectively expect continued deterioration over the next five years (Exhibit 14). More positively, however, business expects intercity rail to continue to improve, and it also expects commuter rail to buck the trend seen over the last three surveys.

Exhibit 14 confidence uk passenger transport will improveovernextfiveyears(%balance)

-40 -30 -20 -10 0 10 20 30 40 50

Interconnectivity of transport networks

Ground transport links to UK airports

International maritime links

Domestic air links

Cycling networks

Local road networks

Motorway road network

Commuter rail network

Intercity rail

Bus and coach networks

Tube/metro/tram networks+46

+13

+39

+3

+3

+2

33

+9

+27

-23

-38

-1Exhibit 13 confidence infrastructure will improve overthenextfiveyears(%balance)

-40 -30 -20 -10 0 10 20 30 40 50

Flood defences

Communication (including digital/broadband)

Waste (0)

Water

Transport

Energy-34

-14

-18

-14

+34


without tangible upgrades, business confidence is unlikely to shift The UK does appear to have made progress under this government – whether through perceived improvements to our digital and rail networks, or through the policy innovations that have demonstrated a commitment to getting new projects off the ground.

Yetwithbusinessunabletoseeimprovementsinkeyareas of our infrastructure, this suggests that the changes we are making are either not fast enough to make a material difference, not broad enough to impact on all areas, or are simply not visible to everyday users. The majority of respondents remain gravely concerned about our future energy supply and transport networks – particularly roads – and confidence that things will improve across the board remains subdued.

With businesses seeing limited progress, it is clear that further action is still needed if we are to turn policy innovation into project initiation, and as the next chapter shows, in many cases, this requires political action.


chApter 2

political barriers risk preventing us from closing the gap on our rivals

With investment reliant on the quality of our infrastructure, it is essential our

networks rival those of our competitors. However the results of this year’s

survey show a familiar story – the UK continues to lag behind our main

competitors – and has done little to close the gap since 2011.

With capital spending constrained, it is essential the UK becomes a stand-out location in the world for infrastructure investment, however, investors warn that at the moment the barriers holding us back are overwhelmingly political in nature.

key stats• KeypiecesoftheUK’sinfrastructureareviewed

as internationally weak, with energy and transport seen in a negative light when compared to our rivals.

• Worryingly,thequalityofourinfrastructurefaresparticularly badly against some of our biggest rivals: australasia, north america and the eu.

• What’smore,businessdoesn’tthinkweareclosingthisgap.In2011,59%ofcompaniessawinfrastructure in eu countries as better than in the uk; in 2014, this has grown to 61%.

• TheUKunderinvestsincapitalspendrelativetootherdevelopedeconomies,so99%offirmswantto see levels raised in line with the g20 average to at least stem the tide.

• Ifwearetoactuallyclosethegap,theUKwillneed to be a stand-out location for private infrastructure investment. while ranking above the eu as an attractive location, we currently lag behind north america and australasia.

• Themostsignificantfactorsthatbusinessseesas stopping us from attracting more private investment are overwhelmingly political. 71% of providers view political uncertainty as significantly discouraging investment, and 54% believe political rhetoric is a major barrier.

infrastructure forms the solid foundations of our international competitivenessInfrastructure is key to our international competitiveness. Our air links and digital networks help us exploit global business opportunities, forging new relationships and rebuilding the UK’s reputation as a trading nation. Our energy costs form the bedrock of price competitiveness, especially for industries such as aerospace and automotive – sectors key to the UK’s industrial strategy. Our transport networks are essential to the 24/7 movement of our people, goods and services, getting them where they need to be, when they need to be there.

Piecemeal improvement is therefore not enough. So long as we trail our competitors, our infrastructure will hinder rather than drive growth. We need to set ourselves a clear benchmark to match, and then exceed the infrastructure of our rivals.

uk infrastructure is considered internationally weak in some critical areas…Business gives the UK a mixed scorecard when it comes to rating our infrastructure internationally. Overall, the UK’s energy, transport and flood defences are judged to be poorer than our international competitors. While this year’s balance figures represent a slight improvement for energy and transport since 2013, they remain below the levels seen in 2011 – suggesting that the UK still needs to claw back ground lost in recent years, never mind narrowing the gap (Exhibit 15, seepage25).


…and we fare poorly against some of our main competitors in mature economies When asked how the UK’s infrastructure compares with our rivals, respondents provide a degree of reassurance about perceptions of the UK (Exhibit 16). So far, our infrastructure is still seen as more attractive than that in emerging market economies suchasIndia,BrazilandChina,althoughwiththescale of capital spending in these locations, their infrastructure is on a rapid upward trajectory.

While this is positive news, when compared with other mature economies, the UK compares less favourably. Our infrastructure still ranks below that of North America, Australasia and the EU, with sometimes significant negative balances.

Digital networks remain an international strong point, despite business assessments of our communication provision starting to plateau over the last two surveys. With the rapid pace of change, however, as seen in the last chapter, today’s advantage can quickly become tomorrow’s ‘norm’. If we are to remain at the forefront of digital communications, it is essential that we plot a long-term strategy to encourage investment in new technologies at the earliest possible stage, giving companies access to state-of-the-art networks.

2014 2013 2012 2011

-50 -40 -30 -20 -10 0 10 20

Energy

Transport

Water

Waste

Communication*

Flood defences**

* Before 2014 the question related solely to digital/broadband** Asked for the first time in 2014

-18

-22

-16

-14

-35

-37

-47

-33

-33

-21

+17

+13

+3

+9

+9

+13

+13

+2

+12

+11

+11

Exhibit 15Significanceofquality,reliabilityandcost for business investment (%)

-40 -20 0 20 40 60 80 100

EU

North America

Australasia

Middle East

China

Other Asia

Russia

India

Brazil

-14

-36

-38

+83

+83

+82

+44

+43

+26

Exhibit 16 uk infrastructure compared to other locations (% balance)

Water is another strong point, going from strength to strength in recent years and demonstrating how a stable framework can reap rewards – giving infrastructure providers the confidence to invest, and providing infrastructure users with improved services.


Gaps of this magnitude represent a significant challenge, but more worrying is the fact we have seen little positive movement on this assessment over the last four years. Comparing the figures to that of our closest rivals in the EU, the gap in the quality of our infrastructure has remained remarkably consistent since 2011 (Exhibit 17).

As a result, 99% of all firms in the survey support the idea of bringing capital spending in line with our competitors when our finances allow. The coalition government recognised that it was wrong to cut capital spending so sharply on coming into office in 2010, and since then we have witnessed a turnaround. Business is now looking for all parties to commit to continue this trend as they head into next year’s election.

lower capital spending makes it less likely that the uk will catch up…On public investment in infrastructure, the UK starts from a disadvantage: our rivals have a long history of higher capital spending – a trend that continues today (Exhibit 18). While figures have converged in recent years, the UK’s capital spending still sits below that of countries such as Canada, the US and France and our rivals have at times been spending two to three times the amount we have – a factor that leaves a legacy.

Business understands and supports continued efforts to reduce the deficit in order to improve the long-term credibility of the UK economy, and appreciates there are limits on how much we can spend. It also understands, however, that competitive and consistent levels of capital spending can form the bedrock of investment in our infrastructure, encouraging additional private investment, sparking major projects, sending out the right signals to investors and helping build strong, resilient supply chains.

0 10 20 30 40 50 60 70

2011

2012

2013

201461

61

54

59

Source: OECD

0

1

2

3

4

5

6

7

8

Germany Canada US Japan France UK14131211100908070605040302010099

Exhibit 17 change in uk infrastructure firms rating the uk as less favourable compared with eu 2011-2014 (%)

Exhibit 18 public investment as a % of gDp, 1999-2014

99%support the idea of bringing capital spending in line with our competitors


…meaning the environment for private investment must stand out from the crowdEven if we go toe to toe with our competitors when it comes to capital spend, this is unlikely to be enough to close the gap on our competitors. We must continue to attract private investment in our infrastructure networks to bridge the gap. This investment remains an attractive proposition – if the opportunities are there, and the environment for investment is right.

However, with the UK competing for internationally mobile capital, it is crucial that we stand out as a place to invest. The good news is that among infrastructure providers and investors, the UK is seen as attractive – surpassing many other potential locations including other EU states and China (Exhibit 19).

Less welcoming is our attractiveness compared to North America and Australasia – which both comfortably outstrip the UK as attractive locations, suggesting that they remain a first port of call for investors.

Under this government, the UK has made solid progress in raising investor perceptions. Between 2011 and 2014, the balance between favourable and unfavourable assessments of the UK relative to other investment locations has steadily improved (Exhibit 20), perhaps reflecting the strides made in improving policy frameworks and the general business environment.

-30 -20 -10 0 10 20 30 40 50 60 70 80

North America

Australasia

Middle East

China

EU

Other Asia

India

Brazil

Russia+75

+38

+34

+23

+10

+9

-10

-22

+1

Exhibit 19 how the uk compares as a place to invest in infrastructure (% balance)

Exhibit 20 change since 2011 in how the uk compares as a place to invest in infrastructure (% balance)

-22

1

-10 0 10 20 30

North America

Russia

Brazil

Other Asia

China

EU

India+28

+27

+24

+24

-3

+19

+16

-22%Investors, on balance, view investment in the UK as preferable to North America


political uncertainty and limited opportunities are the biggest barriers to the flow of private infrastructure investment in the ukThese results are clear: having put in place many of the right tools to facilitate infrastructure delivery, the UK is becoming an attractive location, and yet something still holds us back. With few tangible projects reaching fruition during this parliament, we need to be clear about the barriers that remain to successful infrastructure development.

Asking infrastructure providers their views on the current barriers to investment in the UK, the result is clear: the appetite is there, but short-term politics risks undermining the kind of long-term, stable outlook that investors need (Exhibit 21).

Number one on the risk register of infrastructure providers is political uncertainty. At this stage in the electoral cycle, 71% are saying uncertainty is significantlydiscouraginginvestment.Thesizeofthis score underlines the extent to which a lack of consensus among politicians risks considerable upheaval every five years on issues and decisions that must be taken for the long-term good of the country – something that other nations, such as Australia, have taken steps to address (Exhibit 22).

0 20 40 60 80 100

Infrastructure provider

All companies

Infrastructure assets have the wrong risk profile for my portfolio


All companies

The cost of long-term debt is too high


All companies

It is di�cult to secure su�cient levels of financing


All companies

NIP does not provide su�cient detail on funding/timelines


All companies

National Infrastructure Plan (NIP) does not provide clear priorities


All companies

Over-burdensome regulation


All companies

There is no clear pipeline of projects


All companies

Political rhetoric undermining confidence in markets


All companies

Political uncertainty due to the electoral cycle

Significantly discouraging investment Somewhat discouraging investment

Not discouraging investment

62 34 4

44 49 7

71 26 3

54 43 3

22 69 9

27 63 10

44 45 14

44 41 18

21 57 23

32 51 17

20 43 37

32 51 17

20 43 37

26 44 30

7 39 54

6 50 44

10 40 50

25 36 39

Exhibit 21 factors affecting investment in uk infrastructure (%)

93%Firms say political rhetoric is undermining confidence in markets


The politics of infrastructure must changeThe UK is set to face major infrastructure challenges inthecomingyears,andasweenterthe2015election, we find ourselves at a critical juncture. The engineering and construction industry needs to see a sustained, long-term strategy for infrastructure investments in order to recruit with confidence. The UK’s stop-start approach to infrastructure investment over many decades has led to the current technical skills shortage.

With investors citing political considerations as the key barrier to infrastructure development, we now need to see politicians of all parties sending out the right messages that deliver confidence for the future and new investment prospects. However, the problems we face are not uniform:

• Insomecases,suchasrailanddigital,thefocusisnot on changing a winning formula but agreeing on a cross-party, long-term strategy and letting the market continue with delivery.

• Wherewestilllackaviablelong-termsolution,however, as with aviation and roads, tough decisions will need to be made to remove political roadblocks to new investment.

• Sometimesthetoughdecisionshavealreadybeen made, as with energy and electricity market reform (EMR), and we must ensure that political rhetoric does not undermine this good work and spook investors at the last hurdle.

In each of these scenarios, there is an onus on politicians to set the right course, say the right things and recognise where they have a constructive role to play in attracting the investment that will boost business perceptions and position the UK as a leading light on infrastructure.

Infrastructure providers also identify political rhetoric asamajorbarrier,with54%believingitsignificantlydiscourages investment, while concerns remain about a pipeline of projects and the shape of the National Infrastructure Plan (NIP). Over-burdensome regulation continues to be problematic to some investors, suggesting that while issues such as planning have moved in the right direction in recent years, there are still major hurdles to overcome.

Exhibit 22 infrastructure australia

Australia has an independent body of infrastructure experts, scientists and economists called ‘Infrastructure Australia’, set up to assess the country’s existing infrastructure and then advise government on how to meet its needs and priorities. It also plays a role in the funding of specific projects, both by working with investors and by allocating Commonwealth funds to state-sponsored projects. The development of this body has been praised for creating a more ‘evidence-based’ approach to decisions on nationally significant infrastructure, and its high level of visibility allows it to influence public opinion on specific projects, building consensus.

Number one on the risk register of infrastructure providers is political uncertainty


chApter 3

where we are seeing breakthroughs, politicians must stick with the plan

Elections are often about articulating different visions for the UK’s future.

However, where things are working well, it is important we stay the course

rather than changing direction in order to demonstrate difference or score

political points. Prior to an election, this focus on disagreement over consensus

can stop investment in its tracks, and in the years following, leave a reputation

that takes time to shake.

The UK’s railways are demonstrating real improvement and good outcomes for passengers, businesses and investors so we should not deviate from the current course. Equally, the UK’s digital networks are one of the UK’s infrastructure success stories, but with the rapid advancement of next generation networks, it is essential that we create a stable long-term outlook with cross-party support to ensure we remain at the forefront.

key stats• Investmentsintherailnetworkarepaying

off–abalanceof+46%and+19%haveseenimprovements to metro and intercity rail services in the last five years.

• Businessbacksthecurrentregimetocontinuedelivering improvements. This year, for the first time since the survey began, commuter rail is expectedtoimprove.

• Thereisoverwhelmingsupportforthesystemoffranchising and network rail’s plans to deliver significant investments into the future.

• Bigprojectsalsonowhavewiderbacking,with59%supportingdeliveryofHS2,evenif70%feelthere is still a greater role for government in making the case for new investments.

• Theimportanceofdigitalnetworksisontherisefor businesses of all types, with increases in the importance of these networks found in all sectors in just one year since the 2013 survey.

• DespitebeingaUKstrength,businessdissatisfaction with current networks is still too high. 48% of all firms and 71% of those in the iT sector are dissatisfied with current provisions.

• BusinessisparticularlyconcernedabouttheUK’smobile broadband coverage, demonstrated by the fact that 67% of firms rate current coverage asinadequate…

• …andwith55%offirmsseeingalackofaccesstosuperfastbroadbandasinadequate,itisclearwemust do everything possible to maintain the pace of investment.

rail – Investments currently being made are starting to pay off

The picture in recent years is one of improvementAs shown in Chapter 2, many companies consider parts of the rail network to have moved forward inrecentyears.Abalanceof+55%ofbusinessessee tube and metro networks as having improved in the last five years, while a balance of +19% have seen improvements in intercity rail. The exception is commuter rail, which business perceives to have worsened in the last five years by a score of -7%. Across the board however, these results are an improvement on those when we first asked the question back in 2011, including commuter rail – even if, on balance, the view is that the service is still worsening (Exhibit 23).


...and business backs the current approach to deliver Looking to the future, the business outlook is even brighter (Exhibit 24). Tube networks are expected to improvebyapositivebalanceof+51%,while+30%expect intercity rail services to improve. Perhaps even more notable, however, is that commuter rail is also expected to improve for the first time since 2011 when the CBI started gathering data – with a positive balanceof+15%.

Given the scale of investment currently being made, these results should not be surprising. Franchising

Improved Stayed the same Worsened

0 20 40 60 80 100

Commuter rail

Intercity rail

Tube/metro/tram networks

2014

2011

2014

2011

2014

2011

65 25 10

44 34 22

38 43 19

36 36 28

29 35 36

21 33 46

Exhibit 23 assessment of rail networks compared with five years ago (%)

Improve Stay the same Worsen

0 20 40 60 80 100

Commuter rail

Intercity rail

Tube/metro/tram networks62 27 11

52 26 22

47 21 32

Exhibit 24Expectationofchangeinthequalityofrailpassengerservicesoverthenextfiveyears(%)

Strongly support34%

Oppose somewhat1%

(Strongly oppose 0%)

Supportsomewhat 65%

Exhibit 25 Business backing for rail franchises and network rail’s improvement plan (%)

has delivered substantial new rolling stock over the last decade, leading to a 143% improvement in fleet reliabilitysince20068, while passenger satisfaction is at near record highs, standing at 82%9. Furthermore, Network Rail’s ambitious £38bn investment plan over the next control period will play a critical role in supporting transformational projects such as HS2, as well as seeing through those already underway, including the Northern rail hub.

This confidence has spread to commuter rail too, reflecting the scale of investment that is now going into the network. With 400 million more journeys a year expected by 2019-20, the rail industry is investing in additional capacity of 20% peak seats into and out of central London, and 32% peak seats into and out of large regional cities10.

Moreover, this positive outlook is reflected in support for the current system of investment, with some 99% of respondents to the survey saying that they back the current franchising system combined with Network Rail’s investment plan to continue to deliver in the future (Exhibit 25).


This turnaround in fortunes has come at a cost. As the financial burden continues to shift from taxpayer to passenger, rail fares still hit the headlines. Frustrations are understandable, but after decades of underinvestment in the network, during which passenger numbers have soared and little additional capacity has been added, politicians need to be honest about why fares are increasing and how we ensure sustained investment.

To ensure the UK continues its current trajectory, politicians have a vital role to play in order to keep investment flowing. Franchising will continue to deliver more reliable rolling stock and better services, but Train Operating Companies must have confidence that the market place for franchising contracts will continue to be a competitive one. At the same time, politicians must continue to make the case for ambitious upgrades that boost the capacity of our network.

Business backing for hs2 is growingIn the last nine months, under the leadership of Sir David Higgins and Lord Deighton, HS2 has enjoyed a resurgence in support. The publication of a stronger business case was welcome in cementing the need for capacity rather than speed in people’s minds, and the results of this year’s survey demonstrate that support for the scheme is building, with a clear majority of businesses(59%)nowsupportingtheproject(Exhibit 26).

But government must do more to ensure the benefits of these upgrades are translated into local growthWhile support for HS2 is now building, business still feels that advocacy for the scheme is somewhat lacking. More than two-thirds (70%) say that government has failed to make the case for HS2 on the ground, figures that show particularly high dissatisfaction along parts of the planned route (Exhibit 27). 92% of those in the north west say the case has not successfully been made, while 78% of those in London feel the case is still lacking.

Oppose strongly 10%

Strongly support27%

Neither supportnor oppose17%

Opposesomewhat 14%

Support somewhat 32%

Exhibit 26 Business support for hs2 (%)

Politicians must continue to make the case for ambitious upgrades


HS2 is a good example of the level of ambition that now exists around our rail network. It also underlines, however, the important role that leadership at both national and sub-national levels can have in ensuring the benefits of bold infrastructure decisions are well understood, allowing for smooth delivery.

To unlock more development opportunities it is essential that we see the right level of engagement with regions and cities affected by proposed projects, developing coherent plans that link national and regional infrastructure, and ensure that local voices favour the new infrastructure developments. Research conducted by Ipsos MORI for the CBI suggests that local concerns far outweigh those about the national economy. Seeking to influence public support for projects by bringing local voices into the national debate is essential11 (Exhibit 28).

0 20 40 60 80 100East Midlands

South east

London

Scotland

North west

Wales

All70

94

92

83

78

72

72

Exhibit 27 Businesses that feel the government has not yet successfully made the case for hs2, by region (%)

Exhibit 28 Building public support for infrastructure projects

In polling conducted by Ipsos MORI for the CBI and published in the CBI’s Building Trust report, members of the public indicate that the best way to build trust and acceptance for infrastructure plans is to develop a strong local case for action, with local figures playing a key role in making the case. 42% of people look to others in their community to determine whether a project is positive or negative, 33% look to local councillors, 24% to their local MP, with just 11% finding the business developers’ case convincing. As a result, when we continue to make the case for renewed investment in the rail network and other infrastructure, it is critical that the impact on local people, local job opportunities and the local environment is at the heart of the case for new development.

70%of respondents think the government needs to do more to make the case for HS2


digital – retain our current advantage through a long-term, cross-party strategy

our digital and communication networks areanasset,butusersatisfactionismixedAs demonstrated in Chapters 2 and 3, the UK’s digital networks are an asset. On balance, businesses rank the UK’s digital infrastructure above our rivals. Furthermore, firms expect these networks to get better, with 77% expecting provisions to continue improving in the future.

Our advantage takes on additional significance given how important digital networks are to doing business. From communicating with customers in new and exciting ways, to opening the door to global markets, online platforms, payment methods and use of mobile technology have revolutionised daily operations. Firms now rate the quality and reliability of digital networks as the most important consideration, with 91% of companies rating this as a significant factor in investment decisions – up 11% on the same figure last year – and an increase that is even more acute in the sectors most reliant on these networks (Exhibit 29).

Despite this positive assessment, business satisfaction levels indicate a more worrying picture, with considerable room for improvement (Exhibit 30). Only52%ofbusinessesarecurrentlysatisfiedwiththe UK’s national digital infrastructure provision, with levels low among information and communication firms. This hunger for improvement also extends to sectors such as construction, demonstrating the extent to which the importance of digital connectivity permeates all parts of the economy.

Very significant Significant

0 20 40 60 80 100

Professional services

Information & communication

All



All

2014

2013

61 30

94 6

68 27

44 36

82 14

57 39

Exhibit 29Businessesreportingqualityandreliability of digital networks as significant for future investment (%)

Satisfied Dissatisfied

0 20 40 60 80 100


Construction

All52 48

39 61

29 71

Exhibit 30 satisfaction with national provision of digital networks (%)

98%rate mobile broadband networks as important for success, with 42% rating them as crucial


reliable nationwide coverage remains an issue, but we are making progress...The latest data from Ofcom helps us to understand why dissatisfaction persists, even as the UK is seen as a world leader. The data indicates that considerable ‘not-spots’ continue to exist in the roll out of mobile and superfast broadband networks (Exhibit 31). While the overall availability of superfast broadband stands at 73% in the UK, there is a marked difference between the figure for England (76%),andthecomparativefigureforWales(48%).Formobilebroadband,thetrendsaresimilar.51%of Scotland by area remains without 3G coverage from any provider, while 22% of Wales also lacks coverage.

0 20 40 60 80 100

Wales

Northern Ireland

Scotland

England

UK

Wales

Northern Ireland

Scotland

England

UK

% of geographical area with no 3G signal from any operator

Premises with access to superfast broadband

23

6

51

13

22

73

76

52

96

48

Source: Ofcom

0 10 20 30 40 50 60 70 80

Fixed-line broadband

Superfast

Mobile broadband67

55

43

Exhibit 31 Digital network coverage by nation, 3g and superfast broadband (%)

Exhibit 32 companies rating the uk’s networks as inadequate(%)

The lack of consistency when it comes to mobile broadband coverage is particularly concerning. According to this year’s survey data, 98% of all businesses rate mobile broadband networks as important for success, with 42% rating them as crucial. There has been an unprecedented uptick in the use of mobile technology in recent years. Mobile and smartphone traffic increased from 22.8% of all data to 37% in 2013 – a trend that suggests this could become the more popular option for companies in the next couple of years over access from a desktop.12 It is also reflected in the results, with businesses most dissatisfied with mobile broadband coverage (Exhibit 32).

Telecom companies, both fixed-line and mobile alike, have invested considerable amounts in their networks. However, in places, it is simply not economic for the private sector to invest, usually due to the combination of a small customer base that requires disproportionate capital to reach. For this reason, the government has set up a number of initiatives, delivered through Broadband Delivery UK and the situation is improving. Programmes such as the Rural Broadband Fund and Super Connected Cities Vouchers are starting to impact, meaning that targets for coverage have been revised upwards during the course of this parliament in some areas.


If these ‘not-spots’ are to be addressed, it is crucial that the government also makes it easy for telecoms companies to put in place the right infrastructure. Both mobile and fixed-line operators in particular face obstacles in installing new interconnections, particularly around land ownership rights and costs. Landowners are not regulated when it comes to rents charged to dig or build new digital connectivity, and with land rents associated with other utilities much lower, it is important that government also looks at addressing the costs for digital operators.

…butwithdemandalsogrowingfornextgeneration connections, we need a strategy to keep pace with our rivalsDigital connectivity does not stand still as the technological boundaries are always being pushed – whether it is through ever-faster fixed-line connections,or4thand5thgenerationmobilenetworks. Each new development offers a new set of opportunities to business which is never far behind in exploiting the benefits. Asked how important faster, more reliable web access is over the coming five years, 82% of firms say that improvements in superfast broadband would be crucial or very important, while 72% say that improvements in mobile broadband are likely to be critical (Exhibit 33). In fact, just 2% of firms say that they did not expect faster, more reliable coverage to be important to them in coming years.

Given the importance of the next generation of networks to business and the pace of change, the UK cannot afford to rest on its laurels. A year is a long

Crucial Very important Somewhat important Not at all important

0 20 40 60 80 100

Fixed line broadband

Mobile broadband

Superfast broadband4042 16 2

3339 26 2

3634 24 6

Exhibit 33 importance to firms of faster, more reliable webaccessoverthenextfiveyears(%)

time in the world of digital connectivity, and so any uncertainty about the investment environment can have damaging long-term impacts.

It is for this reason that many of the UK’s competitors are already taking concrete steps to develop world-class digital infrastructure, recognising the need to approach the challenge with a long-term strategy and a clear objective. In the 2013 report Let’s get digital, the CBI called for the same in the UK, and the government subsequently committed to consult on a Digital Communications Infrastructure Strategy earlier in the year. However, recent delays to the process have put the deliverability of the strategy within this parliament into doubt. With an election looming, there is a danger that the strategy – even if completed – may be short-lived. This is the kind of long-term thinking that should not fall foul of partisan politics: we know the kind of network we need and politicians should focus on giving infrastructure providers the right long-term framework and therefore confidence to invest.


chApter 4

we can’t duck the big decisions that need to be made

By demonstrating a willingness to take on tough choices and engaging in an

open debate with business and the public to find credible solutions, politicians

can help support the economic momentum we’re now experiencing.

The UK’s roads remain a real national weakness. WithFrancespending75%moreperheadonitsroadsystem, we cannot delay discussion about a new funding model for another five years because it isn’t politically expedient14. Meanwhile, the UK’s air links to emerging markets – critical to our future growth – continue to lag behind those of our competitors, held back by a lack of decisive action on new runway capacity in the south-east. With a new mandate, all parties must offer a compelling vision that addresses the challenges ahead.

key stats• UKbusinessseestheroadnetworkcontinuingto

deteriorate. More than half of uk companies (52%) report a worsening of motorways in the last five years, and 65% see the same in local roads.

• Thefutureisseenasequallybleak,with77%and86%ofrespondentsexpectingmotorwaysandlocal roads to get worse or stay the same over the coming five years.

• But39%areconfidentthatHighwaysAgencyreform will have a positive impact – a figure that increases to 45% among infrastructure providers and construction firms.

• Still80%offirmsremainconcernedaboutwhereinvestment for new roads is coming from, with 86% of all business leaders in the survey now backing greater private investment in the road network.

• Businessesseedirectairlinkswithhighlevelsoffrequencyaskeydeterminantsoftheirtraveldecisions: with 74% seeing the direct routes as importantand66%prioritisingfrequency.

• Whilelinkswithestablishedmarketsremaincritical, emerging markets are not far behind. 64% of firms see air links with north america as important, but just 7 percentage points behind is china (57%).

• Linkstoestablishedmarketsaregood,withsatisfactionat+69%and+68%offirmspositiveon balance with links to the eu and north america respectively. yet for china (+22%), india (+15%) and Brazil (+14%), satisfaction is much lower.

• Withrunwaycapacityquicklyrunningoutinthesouth-east, 46% of firms in london say that indecision on new capacity is already impacting investmentdecisions.Asaresult,92%wanttoseepoliticians implement the airports commission’s final recommendations in summer 2015.


roads – without a national debate on road funding reform, business sees a bleak future

uk roads are still perceived to be deteriorating, and assessments are increasingly damning…Business depends on our road network every day; however the perception amongst respondents suggests they have not seen much improvement since 2011 – despite government funding pledges and the increased use of active traffic management systems, such as smart motorways. More than half of UK businesses report that UK motorways have deteriorated over the last five years, while assessments of local road networks are even more troubling (Exhibit 34).

When it comes to local roads, the results vary considerablybyregion.Whileatleast50%ofbusinesses in all regions feel that local roads have deteriorated over the last five years, concern is

Improved Stayed the same Worsened

0 20 40 60 80 100

Local roads

2014

2013

2012

2011

2014

2013

2012

2011

Motorways18 30 52

19 35 46

20 33 47

18 35 47

7 28 65

4 23 73

4 31 65

6 31 63

Improve significantly Improve slightly Stay the same

Worsen slightly Worsen significantly

0 20 40 60 80 100

Local roads

Motorways2 21 29 35 13

1 13 31 38 17

Exhibit 34 assessment of road networks compared with five years ago (%)

Exhibit 36Expectationofchangetoroadnetworksovernextfiveyears(%)

0 20 40 60 80 100

East of England

London

North east

South west

South east

Yorkshire & Humber

North west

Wales91

90

88

76

68

61

55

55

Exhibit 35 Businesses reporting deterioration in local roads networks compared with five years ago (%)

…and with few large-scale projects actually being delivered, business sees the future as bleak tooWhile the government has set a high level of ambition on roads in the coming years, with proposals to treble investment by 2020-21 outlined in the 2013 Spending Round, 77% of respondents believe that motorway provision will worsen or stay the same in the next five years,while86%saythesameoflocalroads(Exhibit 36).

especially high in Wales and the North West (Exhibit 35).


highways agency reform will help address key business bugbearsMaintenance, congestion and investment in new roads stand out as key business concerns (Exhibit 37). As in 2013, congestion remains near the top of the list – not surprising when the annual cost of UK congestion is £12.9bnayear,withcostsexpectedtoriseby63%to£23bn by 203016.

These results are perhaps to be expected. While UK spending on the road network is set to increase over the next parliament, we are starting at a historic low, with funding at just a third of that 40 years ago. Furthermore, where upgrades have been announced during this parliament, they have rarely graduated into action – held back by further feasibility and value for money assessments. The long-awaited A303 upgrade in the south west is a good example, where an additional feasibility study was announced in the 2013 Spending Round but the Local Enterprise Partnerships (LEPs) on the ground are still fighting for progress to be made.

On local roads, the sustained focus on funding for short-term Repair, Maintain, Improve (RMI) projects has been welcome – especially after the flooding experienced earlier in 2014 – as has funding to address local pinch-points. But the survey results demonstrate that business is yet to see how this additional spending is filtering through into tangible improvements, suggesting the government must tell a better story about the impact of its targeted funding and how the network is improving as a whole.

Achieving net gains to our roads network will require improvements to both the Strategic Road Network and local roads to overcome the current two-tier system. Priority investment into vital trunk routes via the Highways Agency and joined up support from local authorities and neighbouring councils will help remove existing bottlenecks in the local road network, making the whole system more efficient. To help this to happen, the CBI recommends that government sets out details of how local transport bodies can bid for projects via the single local growth fund, while also joining up local funding to align this spending with growth strategies being devised by LEPs15.

The quality of road surfaces matches concerns aboutmaintenance,withapositivebalanceof+85%,indicating that the UK’s record when it comes to keeping our existing network up to scratch has been poor. Subject to political whims, funding for the upkeep of the road network has frequently faced cycles of stop-start activity, dependent upon the political cycle and where priorities of the day lie. This has a knock-on effect for the road industry’s ability to plan for the future and contractors have had their fingers burnt as a result – investing in apprentices and ramping up activity, only for funding to fall flat.

For this reason, the reform of the Highways Agency (HA) into a government-owned company along with a five year Road Investment Strategy (RIS) is seen as a welcome step by business. 39% are confident that HA reform will have a positive impact on the roadnetwork–afigurethatincreasesto45%amonginfrastructure providers and construction firms as those most affected by the stop-start cycle of funding. If implemented correctly, this will help to reduce some of the shorter-term uncertainty for those in the supply chain giving a clear picture of demand in the years ahead. With the reforms set to come into force in April next year however, the challenge remains to ensure that the legal changes are complemented by a culture shift within the HA, ensuring that the requisite skills and experience are available to operate at an arms-length distance from government on day one.

0 20 40 60 80 100

Safety

Taxes

Disruption caused by road works

Investment in new roads

Congestion

Quality of existing road surfaces85

84

72

50

23

3

Exhibit 37 Balance of businesses concerned about factorsaffectingthequalityofUKroads(%balance)


we need an honest national debate on road fundingThisstillleaves61%ofcompanieslookingforanothersolution to help fix our roads, and while HA reform is clearly a step in the right direction, there is still a considerable black hole in our funding for another key aspect that sits high up on businesses’ list of concerns – investment in new roads.

With fiscal constraints set to continue for the foreseeable future, we cannot put off the difficult discussion of longer-term road funding reform any longer. Since the Prime Minister’s speech in 201217, tentatively opening the door to discussion of private investment, the issue has fallen away, much to the disappointment of many global investors who had started to look seriously at the role they could play in improving the UK’s network.

While clearly a sensitive subject, our roads will not improve without difficult decisions being made. Businessunderstandsthis:86%offirmsand84%of providers support greater private investment into the road network (Exhibit 38). Just 1% are strongly opposed to the idea. In 2012, the CBI proposed a regulated asset based model18 as an indicative framework for introducing private sector involvement into the road network in order to spark some life into this debate, and ahead of the forthcoming election, debate is exactly what we need again now (Exhibit 39).

.

Stronglysupport 40%

Supportsomewhat 46%

Opposesomewhat 13%

Strongly oppose 1%

Stronglysupport 48%

Supportsomewhat 36%

Opposesomewhat 15%

Strongly oppose 1%

All

Providers

Exhibit 38 Business support for greater private investment in the road network (%)

Lessons should be learned from investigations by HM Treasury and the water industry to smooth the financial stop-start experience created by the five-year Asset Management Plan (AMP) cycles.

Exhibit 39 regulated asset based (raB) model of roads funding

A RAB model would address the insufficient investment and uncertainty caused by current short-term funding cycles by taking the road network out of the government’s budget. It could provide a secure revenue stream through user charging – created initially by reclassifying vehicle excise duty but with the flexibility to explore other mechanisms, such as tolling. The long-

term outlook provided by a RAB model is attractive to investors to maintain the current network and expand capacity. In this model, a roads regulator would champion standards for motorists and ensure value for money through its licences and capped charges, with government learning lessons from the experience of regulators in other sectors.


Crucial Very important Quite important Not important

0 20 40 60 80 100

Cost

Ease of access on the ground

Frequency/flexibility of service

Direct flights to the final destination20 54 18 8

17 49 27 7

14 45 31 10

17 36 38 9

Exhibit 40 factors affecting business travel decisions of companies (%)

Aviation – Indecision on new runway capacity is already impacting business investment

Frequent,directairlinksareneededtorespond to global opportunities – wherever they ariseIt’s not just our domestic transport networks that require big decisions to be made: our links with the rest of the world, upon which our ability to grow trade relies, also requires some bold thinking, particularly as the UK faces a shortage of runway capacity in the south-east.

Business and politicians want to see the UK revive its role as a trading nation by exploiting global opportunities, and the survey demonstrates that direct,frequentairlinksareabigpartofthepuzzle(Exhibit 40). Asked how different factors affected their travel decisions, 74% of companies rate direct flights to the final destination as either crucial or very important – with just 8% saying that it is not important to them to have these links. Moreover, it’s not just the existence of an air link that matters – it is alsothequalityofthatlink.66%ofcompaniesreportthat frequency and flexibility are either crucial or very important to them, with just 7% saying these factors are not important.


As would be expected with our largest trading partner, direct flights to EU markets are most important, with 78% of businesses seeing them as important, and 40% describing them as crucial. These figures are up on 2013 and 2012, indicating that the EU remains the bedrock of the UK’s trade. Next highest is North America, but just 7 percentage points behind is China –withwelloverhalfofallfirms(57%)consideringthese links as important – a figure that climbs to 78% for manufacturing firms. Not far behind are flights to India, which are seen as important to almost half of allfirms,whileathirdseeconnectionstoBrazilandRussia as important.

Takenasawhole,61%ofrespondentstothesurveysay that direct flights to at least one of the BRIC economies are either important or crucial to their business. Given that currently just 3% of UK exports headtoChinaand1%gotoBrazil–yetdirectflightstoboth locations rank highly amongst firms. This clearly demonstrates that business does not just have an eye on the markets it is in today, but also on where it can go tomorrow.

The importance of frequent, direct services corroborates earlier findings of research conducted for the CBI by Steer Davies Gleave in 2013 19, which indicates the critical role that direct links play in growing trade. The research, analysing trade patterns between 48 pairs of countries over a 20 year period indicated that for each and every daily route between the UK and an emerging market, trade increases by as much as £128m a year – £1bn from eight routes alone, demonstrating that the first step to growing trade is getting to the markets to which we want to sell.

0 10 20 30 40 50 60 70 80

Russia

Brazil

India

Other Asia

Middle East

China

North America

EU78

64

57

54

54

45

33

33

Exhibit 41 firms reporting direct flights as important or very important (%)

emerging market connectivity is high on the business agenda…It’s not just selling to the usual suspects that is important. With global growth increasingly coming from emerging economies – whether those of today, such as the BRICS or those of tomorrow like the MINTS or ‘next 11’20 – business is clear that we must be ready to move quickly to build the right connections. This year’s survey shows that direct connections with established and emerging markets alike are important to business (Exhibit 41).


…but our links to emerging markets remain an achilles heelIn assessing the quality of our air links, business rates the UK’s connections with established markets highly; however, the picture is much less rosy for emerging markets, and the gulf in satisfaction is noticeable (Exhibit 42). While more respondents say they are satisfied than not satisfied, the balances are substantially lower, with only links to Russia21 seeing ascoreabove+25%.

Data on the forging of new links illuminates why dissatisfaction has emerged regarding the UK’s connectivity to emerging markets in recent years. Analysis shows that over the last 20 years, the UK ranksin4thor5thpositionwithintheEUforshareofnewflightstoChina,BrazilandRussiaasourrivals forge direct connections with a wider range of destinations, giving them first-mover advantage. With success in these markets so critical to meeting our exports target, that the UK is being left behind is a major concern.

indecision on runways capacity suggests this won’t improve, impacting investmentThe current constraint on UK airport capacity in the south-east is well understood by business. In the interim report of the Airports Commission, published in December last year, the case was made for at least one additional runway by 2030 in order to avoid running out of capacity, with a second likely to be requiredasearlyas2050.Yet,withourpoliticiansstill not signed up to implement the Commission’s recommendations, just under a third of businesses (32%) expect improvements to international air travel in the next five years, leaving two-thirds either seeing the UK remaining the same or worsening (Exhibit 43). Reflecting the shortage of capacity in the south-east, this score is even worse in London, with just 19% expecting to see any improvement in the coming years.

0 10 20 30 40 50 60 70 80

Brazil

India

Other Asia

China

Russia

Middle East

North America

EU

+68

+69

+38

+22

+17

+15

+14

+49

Improve significantly Improve slightly Stay the same

Slightly worsen Significantly worsen

0 20 40 60 80 100

International air

Domestic air25 52 17 6

32 43 22 3Exhibit 42 Business satisfaction with links to markets (% balance)

Exhibit 43Expectationofchangeacrossairpassengertransportovernextfiveyears(%)

Worryingly however, businesses are now starting to report that indecision is starting to have a detrimental effect on their future investment decisions, with one in five saying it is having an impact (Exhibit 44). When brokendownbyregion,46%ofbusinessesinLondonsay their investment decisions have been hit by this hiatus, whilst a third in the West Midlands also say it is having an effect.


The situation has now become critical and inaction is no longer an option. 92% of businesses say that they would like to see the recommendations of the Airports Commission fully implemented when it reports back with recommendations on the location of new capacity in2015.WiththeUK’srunwaycapacitydiminishingeach year, it is imperative that the new government of the day acts immediately to create the necessary planning policy statements and statutory instruments to get building by the end of the parliament. This means all political parties taking the decision to put the country’s economic interests above politics in party manifestos.

spare hub capacity is needed to tackle pinch-points in the uk’s connectivityWhile all airports have a role to play in growing our links, not all airports play the same role. If the UK is to address the UK’s emerging market Achilles heel, we are going to need a solution that prioritises the creation of spare hub capacity. Research for the CBI showsthatfromasampleof15emergingmarkets,hubairports serve on average nearly three times as many destinations as point-to-point airports, while also delivering almost twice as many flights on the routes thatareserved–1.5dailyflightsfromhubs,comparedto 0.8 from point-to-point airports22.

With transfer passengers allowing connections to new emerging markets to become viable before sufficient demand exists from the population on the ground around the airport alone, the presence of a hub with spare capacity capable of sparking new routes is a real asset, providing first-mover advantage for UK business.

As a result, it is essential that when formulating his final report, Sir Howard Davies takes into account the UK’s current weaknesses, ensuring that we future-proof the decisions we make today to set us on the right path towards the kind of economy we want to be tomorrow.

0 10 20 30 40 50

South east

West Midlands

London

All

46

20

18

33

Exhibit 44 Businesses reporting the lack of decision on new aviation capacity in the south-east having a significant impact on their investment decisions (%)

92%Businesses say that they would like to see the recommendations of the Airports Commission fully implemented


chApter 5

politicians must deliver messages that reinforce rather than restrict future confidence

The burden of responsibility falls on all parties to maintain the momentum

of investment in our infrastructure networks, especially in an election year.

Business is pragmatic: it recognises the realities of an election, but it is

essential that all sides show an awareness of the long-term impact that political

messages can have at this time.

Energy is a prime example. The scale of the challenge is huge: the UK needs to attract £100bn to secure and decarbonise our energy system, whilst ensuring that consumers’ bills remain affordable23. Despite the real policy progress that has been made during this parliament – the Energy Act gaining Royal Assent being a key milestone – there is a risk that careless political rhetoric will have a knock-on effect on business’ confidence in the UK’s energy future. With the stakes high, and confidence low, we need all parties focusing on the positive actions that will make the right kind of difference, while avoiding the creation of unnecessary uncertainty in order to score short-term political points.

key stats• Energyismissioncriticaltobusiness

competitiveness,asthree-quartersofcompaniesconsider reliability and cost significant factors in choosing where to invest.

• ConcernsthattheUKisnotattractingtheinvestment needed for the future have steadily eroded business confidence that supply will improve,withabalanceof-34%firmsexpectingimprovement in 2012, -54% in 2013 and now in 2014, -67%.

• 80%offirmssayfearsaboutfutureenergysecurity are being factored into their investment decisions now, while 74% say the same about fears of higher costs.

• 95%ofbusinessessayelectricitymarketreform(eMr) will improve investment in energy, so with the right measures in place, it is essential that political rhetoric encourages rather than stymies this investment.


energy – After the success of eMr, rhetoric now risks investment

The uk is facing a major energy investment challenge, with energy security a key priorityThe UK is currently embarking on the biggest transformation of our energy market since privatisation, which will require over £100bn of private sector investment24. Indeed, energy projects account foralmost60%oftheNationalInfrastructurePlan’s£383bn pipeline.

This is needed first and foremost to keep the lights on – a major priority for business, with 87% of those surveyed citing energy security as a concern – a figure that rises to 92% among manufacturing firms (Exhibit 45).

Much betterposition 2%

Better position11%

Worse position45%

Much worseposition 15%

About thesame 27%

Source: CBI-YouGov poll 'Business and public attitudestowards UK energy priorities', May 2014

Exhibit 46 Business views of whether the uk’s energy security is better or worse than five years ago

This reflects polling carried out by the CBI and YouGov25 earlier in the year, which showed that one in five businesses believed the UK’s security of supply position to be worse now than it was five years ago (Exhibit 46).

This concern is certainly understandable – with a fifth of our power stations coming offline by the end of the decade, our electricity capacity margins are set to fall as low as 2% next year, which is uncomfortably tight (Exhibit 47, see page 48). Despite increased investment across the UK’s energy grid in recent years, there is still a very real perception that we are experiencing an energy crisis, and there is clear evidence this is affecting firms’ investment decisions. Going ahead with Hinkley Point C, for example, will not immediately solve our capacity constraints, as the station is only expected to start producing power from 2024. In the short term, sensible interventions are being made to manage both electricity demand and supply, but importantly, we must attract sustained investment in a balanced and diverse energy mix if we are to ensure the lights stay on in the future.

Slightly concerned Concerned

Not particularly concerned Not at all concerned

0 20 40 60 80 100


Manufacturing

All

47 41 111

62 28 8 2

60 32 8

Exhibit 45 levels of concern about future energy security of supply (%)


0

2

4

6

8

10

12

2018/1917/1816/1715/162014/15

Source: Electricity Capacity Assessment Report 2014, Ofgem

Overall range Future Energy Scenario range

Exhibit 47 ofgem’s projected electricity capacity margins2014-2019(%)

But while the policy is shaping up, there is a risk that the politics undermines progressAttracting this investment requires a long-term, stable market framework, and on this front, solid progress is being made. The Energy Act is now on the statute books and is firmly in the implementation phase with the Capacity Market auction due to takeplacethiswinter.Indeed,95%ofbusinessessurveyed agree that implementing EMR will improve investment (Exhibit 48), reflecting the fact that multiple contracts have now been signed for new renewable generation and further commitments have been made to invest in an offshore wind manufacturing site in Hull. We now also have an agreement across Europe on an energy and climate change framework for 2030, including a new emissions reduction target of 40%.

Yetwhileslowbutsteadyprogressisbeingmadeon the policy framework, much of this work is being overshadowed by the politicisation of energy policy, which is undermining business confidence in future improvements. Despite a continued consensus on the big questions around the UK’s energy future, indicated by the significant majority with which the Energy Bill passed through parliament, political rhetoric seems to suggest a greater divergence. Whether it is the threat ofafuturepricefreezeorcommentsaroundcuttingsubsidies for onshore wind, political risk is impacting on investors’ sentiment.

95%agree that implementing EMR will improve investment

Strongly support41%

Opposesomewhat 5%


Somewhatsupport 54%

Exhibit 48 firms’ support for full implementation of electricity market reform to improve investment climate (%)


energy costs are a major concern, and more must be done to support consumers in managing themOf course, the major preoccupation for politicians is the cost of energy, and this is a key concern for business too, with 94% reporting that they are worried about the cost of future energy supply (Exhibit 49). Levels of concern are particularly high among manufacturers, with 97% worried about the impact of costs.

Indeed, the cost of power in the UK for industry has been peeling away from European competitors, with prices up to 33% higher than the EU median for extra-large users, ranking the UK 14th among the EU1526. For those competing in a global market, this is seriously undermining their competitiveness as UK-based businesses. A position whereby energy costs contribute to driving industry abroad or deterring investment in the UK would be bad for jobs, bad for growth and bad for the environment.

The decision taken in the March 2014 Budget to freezetheUKCarbonPriceSupportandexpandandextend the compensation package provided partial relief for some energy-intensive industries (EIIs), but there remains more that can be done. For example, it is important to implement the exemption for these industries from the costs of EMR, and the government should work in conjunction with industry to further rollout long-term decarbonisation roadmaps. Energy efficiency has already played a major part in industrial decarbonisation, and further support is needed to reach the high-hanging fruit and to simplify the policy landscape.

politicians must play the long gameIt is clear that business concerns are starting to bite on the ground. When asked what impact these concerns around energy have had on company investment decisions, 74% of businesses anticipate future energy costs having a negative impact while 80% feel similarly about security of supply.

It is important, therefore, that business confidence is restored, and political mood music will play a key role. At the moment, opportunism is trumping pragmatism and short-term thinking risks undermining long-term investment. While we cannot expect to completely take the politics out of energy, given its huge national importance, we need our politicians to keep an eye onthelong-termprizeandmaintainthetrustandconfidence of industry.

Exhibit 49 levels of concern about future energy costs (%)

Slightly concerned Concerned

Not particularly concerned Not at all concerned

0 20 40 60 80 100


Manufacturing

48 46 51

244 49 5

64 33 3

All


chApter 6

a new approach is needed to boost our ability to take the right decision, at the right time

To better deliver against the UK’s long-term infrastructure needs, it is essential

we find a new way of ensuring decisions are made when they need to be, and

that we stick to them – even where it might be politically more expedient to

change course.

We need a new approach that builds consensus around our priorities, takes the sting out of decision-making and ultimately filters through to the speedier delivery of a pipeline of projects – at both national and local level. While there are a range of improvements that would help, business is clear that an independent system that identifies pinch-points early on and works out what is needed could boost the UK’s capacity to take decisive action.

key stats• Businesswantstoseeallpartiescommitto

bold action in manifestos, including backing for rail franchising and network rail’s investment programme(99%),commitmenttoimplementtheAirportsCommission’sfindings(92%)andlong-term road funding reform (86%).

• Inthelongrun,businesswantstoseeanewapproachtoinfrastructure,with89%backingthecreation of an independent body to assess the uk’s long-term future needs. in this framework, 99%ofbusinessfeelitwouldhavebeeneasiertomake the case for hs2 successfully.

• Businessisalsosupportiveofgreaterlocalinputon infrastructure spending, with 86% in favour of greater spending power for local enterprise partnerships (leps) and 73% for local authorities.

• It’snotjustpoliticsthough:businessbelievesmoreaction is needed to attract a range of commercial investors(92%),toimprovecommercialawarenessingovernment(92%)andtotackledelaysinplanning(91%)togetprojectsmoving.

• 97%ofcompaniesfeelthatamoreattractivecapital allowances regime would boost private appetite for infrastructure investment – something that could be delivered within this parliament.

uk business backs the idea of an independent body to assess the uk’s long-term infrastructure needsOver the course of the last three chapters, business appetite for the incoming government to take decisive action is clear (Exhibit 50). From the backing of rail franchising, to implementation of the Airports Commission’s recommendations and a strong commitment to HS2, the overwhelming majority of businesses would like to see clear and unambiguous commitments in forthcoming party manifestos. This supports the conclusion of Chapter 3 that the key barriers to improved infrastructure are political in nature – often as a result of the short-term political cycle.

89%support the idea of an independent commission to assess the UK’s infrastructure needs


In the longer run, however, business is clear that we cannot continue to see major decisions mounting up as politicians put off making the tough calls required. In this year’s survey, business overwhelmingly demonstrates its support for a new approach to establish the UK’s long-term infrastructure needs. Asked whether they support the idea of establishing an independent body to assess the UK’s needs as a way of building consensus, as recommended by Sir John Armitt, 89% of all companies backed the idea, including virtually all infrastructure providers (Exhibit 51).

While the detail of such an independent commission would need careful consideration, the underlying rationale is that it would be able to step back from the short-term politics of major issues, assessing the UK’s longer-term needs based on evidence and delivering an assessment against which government action can be held accountable, as well as creating consensus around projects (Exhibit 52, seepage52).

Part of the problem is that, currently, the case for major infrastructure upgrades is not well made, and so we need to spark a debate on the nation’s long-term needs, long before our current networks start to creak. With no vision or national consensus over what needs to be built, when and where, it is hard to make the case for new infrastructure – especially when these projects may add costs to consumers and cause local disruption.

The drawn out debate around HS2 demonstrates how damaging a lack of consistent messaging from government on the cost and strategic importance can be. Initially sold on the basis of its speed, the project appeared to be an optional upgrade rather than essential. When the projected costs increased the public naturally questioned the need for HS2, as well as the credibility of the project, leading the government to revise the business case to focus on capacity.

0 20 40 60 80 100

Commitment to HS2

Greater private investment in the road network

Implement Airports Commission’s recommendations

Implement electricity market reform

Support rail franchises and Network Rail’s improvement plan98

95

92

85

77

Exhibit 50 support for manifesto priorities to boost infrastructure delivery (%)

Strongly support Support somewhat Neither support nor oppose

Oppose somewhat Strongly oppose

0 20 40 60 80 100


Manufacturing

Construction

Infrastructure providers

All businesses83851 12

23957

72172

3183940

93061

11

Exhibit 51 support for an independent body to assess the uk’s long-term infrastructure needs (%)


Exhibit 52 an independent commission?

Sir John Armitt’s review calls for a National Infrastructure Commission (NIC), made up of industry experts, independent of party political influence, to set infrastructure policy on a ten year cycle. The NIC would be charged with deliveringa25to30yearassessmentoftheUK’s infrastructure needs every ten years using an evidence based approach, and then monitoring delivery against it, with government departments required to produce plans for each infrastructure sector.

The reason an Armitt-style body of experts appeals so much to business is because the institution would be designed to remove some of the uncertainty from the process of taking decisions on, and then delivering nationally significant infrastructure projects. Such a body could build cross-party consensus, setting out a credible long-term vision which would help create greater stability for investors and also make the public case for infrastructure, as well as holding the government of the day’s feet to the fire on delivery.

An independent body which was constantly assessing and updating the National Infrastructure Plan would eliminate the current pattern of stop-start investment – helping infrastructure providers plan for the future, allowing for the development of robust supply chains, as well as recruitment and retention of the right skills, and even encouraging re-shoring activities. What’s more, investors would be able to align their own funds with an improved long-term pipeline of projects, with a knock-on impact on access to finance at better rates, potentially reducing the costs of infrastructure to consumers and the UK taxpayer.

Reflecting on whether it would have been easier to make the case for HS2 successfully if it had been part of a clear long-term infrastructure plan, 100% of infrastructure providers, and 99% of UK businesses feel it would have been (Exhibit 53).

It is not only business that feels this change in approach would help make the case for major infrastructure. In polling conducted by Ipsos MORI for the CBI on public attitudes towards infrastructure, just6%ofpeoplesaidthattheytrustedgovernmentministers to make a strong case for infrastructure upgrades,comparedto54%whotrustedindependenttechnical experts, indicating that an independent commission could help boost the public case for new projects too27.

Significantly easier Somewhat easier

0 20 40 60 80 100


All busineses5346

4654

Exhibit 53 Businesses that agree making the case for hs2 would have been easier as part of a long-term infrastructure plan (%)


0 20 40 60 80 100

LEPs

Local government

86

73

Exhibit 54 support for greater control of infrastructure spending by local government and leps (%)

ensure national and local priorities are complementaryWhile large-scale national infrastructure understandably dominates the headlines, local network improvements can be just as important to firms. Different regions have different needs, and so it is essential that there are voices speaking up for local priorities, as well as ensuring large national projects have a transformative effect at a local level – an aspect that has taken on additional significance in recent months with the growing debate about greater devolved powers to nations, English regions and key regional cities.

Support seems to be strong for greater local control over infrastructure spending. When asked specifically whether giving greater control to Local Enterprise Partnerships (LEPs) and/or local authorities would be supported, most businesses agreed that it would (Exhibit 54), suggesting strong local leaders have a valuable role to play in bringing about positive change.

Too often, however, businesses have cautioned that government decisions on local infrastructure are viewed in isolation, meaning that opportunities to make a real difference are missed, so it is essential that central government steps back to focus on truly national schemes, while empowering local bodies to take control at the sub-national level. One way of doing this, as highlighted in the CBI’s Next Regeneration report,28 is to improve the joining up of the wide range of central funding schemes to make them available to local areas through the Local Growth Fund, thereby reducing the amount of time and resource local bodies must commit to preparing bids.

There are also improvements that can be made at the local level to the way funding is used to deliver maximum impact. In particular, business is keen to see these bodies work more closely together to deliver projects across geographical boundaries, with 88% of infrastructure providers agreeing that this would have a significant impact on the delivery of infrastructure priorities (Exhibit 55).

0 20 40 60 80 100


All businesses

88

85

Exhibit 55 impact greater collaboration between neighbouring local authorities/leps would have on the delivery of infrastructure (%)

Business is keen for local government to work much more closely with LEPs to deliver infrastructure


A failure to join up public funds at a local level is often seen as the reason why transport upgrades do not get off the ground. There are examples where this has been achieved with great results – authorities in Greater Manchester pooled resources to achieve greater scale and returns on their investment, to create a £1.2bn fund that will be invested in schemes based on their potential impact on gross value added. Business is now keen to see more positive examples of collaboration to deliver on local growth priorities.

0 20 40 60 80 100

Reducing the cost of debt

Improving private sector contract management

Mitigating construction risk

Improving public sector contract management

Reducing regulatory burden

Tackling delays and costs in the planning system

More commercial awareness and project-management expertise in govt

Attracting a broader range of private investors

Introducing a clearer pipeline of projects93

92

92

91

88

81

78

72

71

Exhibit 56 Business support for policy changes whichareexpectedtoimproveinvestment(%)

But it’s not just the politics getting in the way of deliveryAs Chapter 3 demonstrated, the UK’s business environment for infrastructure investment does not yet stand out from the crowd and politics is not the only concern. If the UK is really to deliver the step-change in private investment required to bridge the gap between us and our competitors, we need to be more ambitious, removing all barriers to improved delivery.

As opposed to assessing the barriers to investment, the survey also asked investors what actions in the forthcoming parliament would have the greatest impact on investment in UK infrastructure (Exhibit 56).

action on capital allowances can help boost the range of private investors in the uk…One major barrier identified by business for the attractiveness of UK investment is the UK’s capital allowances regime. The tax treatment of capital expenditure can have a significant impact on the overall cost of investment and plays a central role in making the UK a desirable investment location for internationally mobile capital. While cuts in corporation tax have boosted the UK’s broader tax competitiveness, the UK still has the lowest net present value of capital allowances in the G20.

CBI analysis has shown that if the UK were to improve its capital allowance regime in line with the G7 average29, the level of total investment could risebyaround£50bninthelong-term,andthesurvey indicates that business agrees that with the right incentive, investment will grow. Asked what impact the introduction of capital allowances across all infrastructure assets (including structures and buildings) would have on infrastructure investment, 97% of businesses supported the view that this change would have an impact, with more than a third strongly supporting it (Exhibit 57). This figure increases further for infrastructure providers – those that understand what makes an attractive investment location, with 57%believingitwouldhaveastrongimpact.

Once again, a clearer pipeline of projects came out on top, highlighting the extent to which political action is needed. However, the survey also highlights a range of other non-political factors meriting closer attention by policy-makers, including:

• AbroaderrangeofinvestorsinvolvedinUKinfrastructure, ensuring that where opportunities emerge, competition exists to finance it.

• Morecommercialawarenessandprojectmanagement expertise in government capable of quickly moving opportunities through the pipeline to the point of construction.

• Reductionsinregulatoryburden,withonesuchburden in the form of delays and costs in the planning system, ranking highly in its own right.


…while positive steps taken by infrastructure uk to boost commercial awareness in whitehall must become the normThat greater commercial expertise and project management inside government features so highly on the radar of business demonstrates that the

Stronglysupport 36%

Supportsomewhat 61%

Opposesomewhat 3%


Stronglysupport 57%

Supportsomewhat 42%

Opposesomewhat 1%


All

Providers

Exhibit 57Supportforextensionofcapitalallowances to boost infrastructure investment (%)

efforts made in recent years by Infrastructure UK to boost commercial awareness across government departments is just what is needed. Led by Lord Deighton, these reforms have included the creation of a central team of commercial specialists within Infrastructure UK (IUK), deployed to infrastructure projects across government. The establishment of departmental infrastructure capacity plans is also welcome, ensuring that each Whitehall department has the skills required to make key decisions on infrastructure they are responsible for.

These changes are appreciated amongst UK infrastructure providers and business in general, as they want to see public sector skills more closely aligned with those found in the private sector when it comes to the procurement process for major infrastructure projects.

Business will want to see continued action on this front to ensure the commercial expertise of IUK is shared and reflected throughout the procurement teams of Whitehall departments. The transformation of the Highways Agency into a government-owned company, for example, offers an excellent chance to demonstrate that the concerns of businesses are well understood. By ensuring that from day one, the skills exist to provide a long-term financial settlement for businesses in the supply chain and a transparent and speedy process for procurement, confidence in the longer-term capabilities of the reformed Agency will be bolstered.

with planning still high on the agenda, there is more than can be doneWe have made great strides on planning for nationally significant infrastructure, through the introduction of the National Planning Policy Framework (NPPF) and changes to the Planning Inspectorate, but business is clear that we still fall short when infrastructure does not fall into this category. Businesses overwhelmingly agree(96%)thattheUK’splanningsystemisabarrierto the delivery of new infrastructure projects and that there are a number of urgent improvements that can still be made (Exhibit 58 & 59,seepage56).


process for obtaining non-planning consents would help get projects built, while a more limited role for judicial review and action to boost skills and capacity in local planning departments also features highly.

Whilst not top of the list, it is somewhat worrying that 67%ofinfrastructureprovidersbelievereducingthescope for the Communities and Local Government Secretary of State to call in projects would significantly improve the planning system. Since 2011, the number cases which missed statutory targets at recovery or call in stage has increased year on year: from 3 to 2830.

A number of called-in projects, particularly those related to renewables have faced serious delay in the last two years (Exhibit 60)31. High-profile cases such as Cory Environmental’s energy from waste plant in Norfolk have hit the headlines, but other applications, especially in onshore wind, have also been affected. Calling in projects without a clear timetable for resolution has the potential to seriously damage not only the investment prospects in particular projects, but also the UK’s reputation as a place to invest. Local growth cannot be held hostage by political whim, and if we are serious about attracting investment, government needs to introduce a time-limit on these planning decisions. Even the most difficult decisions must be made sooner or later.

Exhibit 60 The call-in record on wind projects

Since June 2013 a total of 49 energy from wind projects have seen an intervention from the Communities and Local Government Secretary of State, with a total potential generating capacityof506MWandatotalinvestmentvalueofover£560m.

So far, however, there have been 18 decisions, 16refusalsandtwoapprovals,meaningthatthe refusal rate by project is currently 89%. The average time these projects have spent in the planning system is equal to 30 months for the 18 projects which have currently been decided from the beginning of the planning process. The projects which are still undetermined have also so far spent an average of 30 months in the planning system and are still awaiting a decision, with further delays resulting from the call in process.

Exhibit 58 Business’ priorities to improve the UK planning system (%)

0 20 40 60 80 100

Reforming the Community Infrastructure Levy

Reducing scope for secretary of state to ‘call in’ projects

Reducing consultation requirements

Limiting the role of judicial review

Increasing the use of planning performance agreements

Delivering up-to-date local plans

Allowing developers to submit proposals to the Planning Inspectorate

Boosting skills and capacity in local planning departments

Streamlining the process for obtaining non-planning consents

Longer-term infrastructure planning (eg 30-year horizon)91

86

85

79

76

72

70

68

55

53

Exhibit 59 Infrastructure providers’ priorities to improve the UK planning system (%)

0 20 40 60 80 100

Reforming the Community Infrastructure Levy

Delivering up-to-date local plans

Reducing consultation requirements

Reducing scope for secretary of state to ‘call in’ projects

Allowing developers to submit proposals to the Planning Inspectorate

Increasing the use of planning performance agreements

Boosting skills and capacity in local planning departments

Limiting the role of judicial review

Streamlining the process for obtaining non-planning consents

Longer-term infrastructure planning (eg 30-year horizon)97

90

83

83

81

77

67

66

66

53

Exhibit 58 Businesses’ priorities to improve the uk planning system (%)

Exhibit 59 infrastructure providers’ priorities to improve the uk planning system (%)

Top of the list is a view from business that longer-term infrastructure planning could improve the UK’s entire planning system. The implication is that with clear guidance on what the UK needs, and when it needs it, an infrastructure commission could potentially have a trickle-down effect providing clearer justification for proposed projects.

Secondonthelist,86%ofbusinesses–and90%of infrastructure providers – think streamlining the


CBIprioritiesforthenextparliamentand beyond:

1) establish an independent body to determine future infrastructure needs and how they should be met, without delaying projects already underway.

2) Boost infrastructure investment by introducing capital allowances for structures and buildings.

3) implement all elements of electricity Market reform to secure the necessary levels of investment in our power sector, and ensure energy efficiency is an infrastructure priority.

4) commit to implementing the recommendations of the airports commission to bring an end to the hiatus over uk aviation capacity, with spades in the ground by 2020.

5) spark a national debate on the future funding of the uk’s road network by conducting an audit of the network, providing a clearer picture of the current funding deficit.

6) provide long-term investment certainty for digital infrastructure by committing to carry through the digital strategy currently being formulated.

Businessexpectscommitmentsinpartymanifestos to improve uk infrastructure delivery Withageneralelectiononthehorizon,attentionhasturned to which of the political parties is capable of enacting a fundamental change in the way we deliver our infrastructure – meeting the UK’s long-term needs, taking the tough decisions that must be made and ensuring the UK stands out as a location for investment. The CBI is calling for all political parties to set out a comprehensive offering in party manifestos that sets us on course to catch up with our competitors.

reco

MM

enD

aTion

s


1 National Infrastructure Plan, Infrastructure UK, 2013

2 Global Competitiveness Report 2014-15, World Economic Forum, 2014

3 Electricity Capacity Assessment 2014, Ofgem, 2014

4 Infrastructure Announcement, RAC Foundation, 2013

5 United Kingdom National Accounts: The Blue Book, Office of National Statistics, July 2013

6 National Infrastructure Plan, Infrastructure UK, 2013

7 CBI economic forecast, September 2014

8 Improving Britain’s Railway, Association of Train Operating Companies, 2013

9 National passenger survey, Passenger Focus, 2014

10 Growth and prosperity, Association of Train Operating Companies, 2013

11 Building Trust, CBI, 2014

12 Intelligent Positioning survey, January 2014

13 Let’s Get Digital, CBI 2013

14 Investing in Britain’s future, HM Treasury 2013

15 Locally Grown, CBI 2013

16 The economic costs of gridlock, Centre for Economic and Business Research 2012

17 Speech by UK Prime Minister to the Institution of Civil Engineers, 19th March 2012

18 Bold Thinking, CBI 2012

19 Trading places, CBI, 2013

20 BRICS–Brazil,Russia,India,China,andSouthAfricaMINT–Mexico,Indonesia,Nigeria,andTurkey Next 11 – Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea and Vietnam

21 Ibid

22 The Nub is the Hub, CBI 2014

23 Investing in Britain’s Future, HM Treasury 2013

24 Ibid

25 BusinessandPublicAttitudestowardsUKenergypriorities,CBI-YouGovPoll,May2014

26 Industrial Electricity Prices in Europe, DECC, September 2014

27 Building Trust, CBI 2014

28 The Next Regeneration, CBI 2013

29 Invested Interest, CBI 2014

30 Compliance with statutory timetables for planning decisions 2010-2014, DCLG, July 2014

31 Written Evidence UKCLG Select Committee Inquiry into operation of NPPF, Renewables UK 2014

references

www.cbi.org.ukproduct code: 10646

for further information on this report, orforacopyinlargetextformatcontact:

lois robsonsenior policy adviser

Business environment DirectoratecBi

cannon place78 cannon street

london ec4n 6hnT: +44 (0)20 7395 8094

e: [email protected]

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