By Lorraine Turner and William Schomberg
LONDON, March 18 (Reuters) – After heavy rainfall, raw
sewage gushes into the River Thames from a network of dank
sewers beneath the streets of London.
A Victorian-era problem that has never been fixed, the
cobweb-laced tunnels just metres from a new underground railway
station at Blackfriars underscore Britain’s infrastructure
backlog.
The need for a new “super sewer” for Europe’s financial
capital was identified as far back as 1989 but privatised
utility Thames Water lacked government funding and had more
pressing priorities, such as cleaner drinking water.
If the new sewer project gets the go-ahead from planning
authorities, preliminary work is due to start in 2015 with the
main tunnelling a year after that.
The kind of project that Britain’s economy desperately needs
as it tries to find ways to grow, the proposed 4.1 billion-pound
($6.2 billion) pipe is planned to run 25 km (16 miles) to
redirect sewage overflow away from the river when it is finished
in 2023.
For now, workers known as “flushers” struggle to keep the
flow of waste clear from used wet-wipes and congealed cooking
fat.
Unblocking Britain’s infrastructure backlog is one of the
major challenges in an economy threatened again with recession,
more than five years since the financial crisis began.
The government’s austerity push represents just the latest
hurdle to getting major projects going. Investors have long had
to contend with a lack of clarity on rules for private investors
and the complexities of the country’s planning laws.
Finance minister George Osborne is expected to announce only
small tweaks to public spending his annual budget on Wednesday.
Resisting calls to borrow more to invest in projects that
could boost growth, he is likely to say extra capital
expenditure will have to be offset by cuts to day-to-day
spending.
Business groups are resigned to slow progress on big
projects. They are pushing instead for shorter-term measures in
this week’s budget to boost housing and road repairs as quicker
ways to inject growth into the economy.
DIGGING DEEP
Government officials, who say they are trying to catch up
after decades of underinvestment, point to a national
infrastructure plan, listing more than 500 projects worth 310
billion pounds between now and 2050. They also stress the launch
of government guarantees to help get projects going.
On Monday, the government accepted proposals by a former
deputy prime minister, Michael Heseltine, to devolve some
investment funding to local authorities, a move which he says
could boost growth. Details on how much money will be diverted
away from central government will be decided in the summer.
In London, there are signs of activity. Giant equipment is
digging deep under the city – turning up mediaeval skeletons in
the process – to build a new train line through the capital.
Describing itself as Europe’s largest construction project,
Crossrail has taken decades to come to fruition and is scheduled
to open in 2018.
The government says annual spending on infrastructure has
been higher since it took office than under the previous Labour
one, taking into account private as well as public investment.
But in terms of public spending alone, net investment has
plunged from 48.6 billion pounds in the 2009 fiscal year to 28.7
billion pounds two years later.
“There’s a can-do ethos about investment in those countries
and a
let’s-try-and-prevent-it-or-make-it-as-difficult-as-possible
ethos here,” said Kevin Cammack, an analyst at Cenkos
Securities.
For most of the period since the 1970s, British government
investment as a percentage of GDP has lagged that of France,
United States, Germany and Canada according to data from the
Organization for Economic Co-Operation and Development.
“We’ve not been heavy investors in infrastructure in this
country. But we are at a point now where our economy needs these
investments brought forward quickly,” said Lee Hopley, chief
economist at EEF, a group representing British manufacturers.
David Marshall at John Laing Infrastructure Fund, which
invests in public-private ventures, said the Dutch government
can sign off on a project eight weeks after announcing a
preferred bidder. In Britain, it can take up to two years, he
said.
MORE ENERGY NEEDED IN POWER
One area of pressing concern is energy.
After a decade of internal policy wrangling – which has
occurred elsewhere in Europe – the government hopes to pass a
law within a year to fix Britain’s future mix of nuclear, fossil
fuel and renewable energy sources, as well as guaranteed prices
for utilties that will reassure them about future profits.
Mark Powell, a partner at consulting firm ATKearney, said
Britain could ill afford further delay.
“At the moment we’re not really building anything,” he said.
“We will end up with an energy system that will spend more money
keeping the lights on than we otherwise might have had to do.”
Businesses complain of a lack of decisiveness in other vital
areas of the economy.
In aviation, a decision by the former Labour government to
expand Heathrow Airport was put on ice by the Conservative-led
coalition. It has asked a commission to report back on the issue
by mid-2015, after an interim report at the end of this year.
A planned high-speed rail line linking London with cities in
the north-west is due to be completed only in 20 years time
although a first section to Birmingham will open sooner.
In the shorter term, a new transport strategy is due to be
announced this year, raising the prospect of more construction
of major roads, something businesses say they badly need.
Deirdre Fox, director of strategic business development at
Tata Steel Europe, said Britain’s thinking traditionally has not
been as long-term as some of its neighbours.
Tata Steel’s potential clients in Britain include power
companies and their supply chain partners. Many of them are
holding off on decisions on energy infrastructure projects –
estimated at 110 billion pounds by the government over the long
term – as they wait for clarity on the UK’s strategy.
“If you don’t have the confidence that a decision you make
today is going to be consistent for the next five or 10 years,
why would you make it?” Fox said.
($1 = 0.6609 British pounds)
(Additional reporting by Christine Murray; Editing by Giles
Elgood)
