Sector trends & challenges
Although ongoing projects have continued throughout the pandemic some projects have been halted, such as Crossrail 2 and the Bakerloo line extension.
There is potential for further stimulus as part of economic recovery being directed at infrastructure projects across the UK in order to stimulate growth. Private investors are being sought to help share the financial burden.
Managing project costs is challenging whilst social distancing impacts on how activities are performed. In addition, issues such as skilled worker shortages, rising material costs and trade barriers may further squeeze margins.
Sector rating profile
Although projects were initially placed on pause during the start of the COVID-19 pandemic, most active projects have now resumed. Over the medium-term, it’s likely that investment in infrastructure will remain high up the political agenda, though the focus of new projects are likely to shift away from London and the South East.
With delays and overspends on projects eroding margins, there remains pressure on the sector to reform its procurement processes.
The longer-term impacts of COVID-19 on the sector are already starting to be felt, as uncertainty around future infrastructure requirements, as well as immediate funding concerns, places some projects on pause.
That said, there is potential economic recovery stimulus being directed at infrastructure projects across the UK, which may result in rapid pick-up of so-called ‘shovel-ready’ projects.
In the current economic environment, the financial burden of these projects cannot be shouldered by the state alone, and an increasing number of private investors are being sought. A prolonged period of low borrowing costs may support new privately funded infrastructure projects.
Many of the issues that the sector was facing prior to COVID-19 still haven’t gone away. Issues such as skilled worker shortages, rising material costs, and barriers to trade may impact the sector more widely.
Extended tender processes are becoming increasingly common and there is a push for further maximising efficiencies whilst ensuring that resilience and contingency levels are adequate.
Certain operators in the sector have looked to divest non-core operations recently as a means of raising cash, simplifying activities and reducing supply chain complexity.
Find Your Expert
Steve Absolom is Interpath Lead for what we call the 'Property' sector. This includes Infrastructure as one of three core segments. Adeola Oke leads our approach to the Infrastructure sector nationally. For a full list of our senior people with experience in this sector use the button below.Our senior team