Sector trends & challenges
Enduring operational challenges from the pandemic are still impacting existing projects and activities. Some projects are still on hold, such as Crossrail 2 and the Bakerloo line extension due to the unprecedented national debt.
Further government stimulus
Industry leaders expect there to be a construction and development ‘supercycle’ globally as governments invest heavily in net-zero carbon targets. Boris Johnson plans to invest £600bn on UK infrastructure over the next five years.
Managing project costs continues to be challenging with self-isolation still commonplace across the UK. In addition, issues such as skilled worker shortages, rising material costs and trade tariffs continue to squeeze margins.
Sector rating profile
With ongoing overspend and spiralling costs on large infrastructure projects, there remains pressure on the sector to reform its procurement processes and we see this as coming under even more focus and scrutiny in the future. COVID-19 has increased pressure on the sector and margins continue to be tight. However the government has set out a healthy infrastructure budget of £600bn over the next five years to stimulate growth and help achieve carbon net-zero targets.
The aftermath of COVID-19 continues to cause operational challenges on existing projects and activities. As a result of the pandemic, some projects continue to be paused such as Crossrail 2 and the Bakerloo line extension, however the majority of existing projects continue to move towards completion. Further stimulus in the form of £600bn over the next five years as part of the economic recovery is being directed at infrastructure projects across the UK. For example the economic stimulus package will support projects such as HS2 and new road and rail developments.
The UK government is committed to investing in the infrastructure sector, but the financial burden cannot be shouldered 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, however managing project costs continue to be challenging whilst COVID cases and self-isolations are still prevalent.
Brexit and political uncertainty continue to drive a re-examining of current operations and procedures. Issues such as skilled worker shortages, rising material costs, and trade tariffs may impact the sector more widely and over the longer term.
Extended tender processes are becoming increasingly common and there is a push for optimising efficiencies, but this is leading to increased overheads at a time where margins are already being squeezed. In addition, increased regulation focus may lead to further increased costs for suppliers.
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