Civils contractors today said that government guarantees for new infrastructure projects have played a vital role in returning the economy to growth.
HM Treasury’s UK Guarantees scheme was introduced in 2012 to combat adverse credit conditions, as the value of lending to new UK infrastructure projects had halved from £6 billion before the financial crisis, to just £3 billion in 2010. The scheme is due to close in December 2016, and can support up to £40 billion in finance.
Under the Scheme, the Treasury guarantees that lenders to infrastructure projects will be repaid in full and on time, irrespective of project performance. The Scheme transfers project risk to government and ultimately the taxpayer, in return for a fee. Once the Treasury has issued a guarantee it cannot withdraw it or change the fee if project risk or market prices change.
To date, the Treasury has guaranteed £1.7 billion of finance across 8 projects and ‘prequalified’ (deemed eligible for support) 39 more projects. The prequalified projects have a total value of £34 billion, equivalent to 7% of the investment identified in the most recent National Infrastructure Plan (£466 billion) and could result in up to £24 billion in guarantees, including the Hinkley Point C nuclear power plant (up to £17 billion). The Scheme means that the Treasury was in effect the second most active lender to new UK infrastructure projects in 2014.
A National Audit Office report on the scheme published today recognises the scheme as “enabling progress” in nationally significant infrastructure schemes.
Commenting, Chief Executive for the Civil Engineering Contractors Association (CECA) Alasdair Reisner said:
“UK Guarantees have played an important role in ensuring infrastructure projects have been properly financed in the last three years.
“Our research has shown that for every 1,000 jobs created in infrastructure construction, a total of 3,000 are created in the economy, and that in the long term, every £1 invested in infrastructure construction raises economic activity by £2.84.There can be no doubt of the role infrastructure investment has played in returning the UK economy to growth.”
“CECA believes that not only has the scheme delivered the certainty of investment our members need to optimise infrastructure delivery, but that the government should explore avenues by which it may continue after December 2016 to shore up the economy as it recovers.”
Click here to read the report UK Guarantees Scheme for Infrastructure in full
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