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Private sector investment in infrastructure needs close evaluation

Words: Laura Edgar

A study has found that there has been a shift from public to private sector infrastructure investment in the past 35 years, increasing from 4 per cent to 59 per cent.

But Devolving Growth? Local Opportunities For Strategic Infrastructure Investment, by Nathaniel Lichfield and Partners (NLP), also shows that the level of private sector investment leveraged by Growth Deals varies “widely” across different parts of the country.

Growth Deals, which are available to all Local Enterprise Partnerships (LEPs), allocate public funding for infrastructure investment, matched with private sector finance. The planning consultancy says there needs to be a greater emphasis on evaluating the outputs of these partnerships because “the current system produces wide fluctuations”.

The report says the £1 billion of Growth Deals announced in January saw some LEPS estimate that an extra £1 million would create 750 new jobs. Others said it would create just 25.

Ciaran Gunne-Jones, economics director at NLP, said: “With such a large variation in potential match funding and subsequent outputs, are all LEPs able to estimate and evaluate impacts with sufficient accuracy? Moving forwards, this will be crucial to any further devolution and investment opportunities.”

So far, chancellor George Osborne has signed six devolution deals in the UK, which will only go ahead if the Cities and Local Government Devolution Bill passes through Parliament. The report says that if places are to maximise opportunities afforded by the devolution of powers - including those over transport - to deliver the infrastructure to support new development a number of factors will need to be considered.

These include:

  • Thinking strategically at a ‘larger-than-local’ level to analyse potential effects of projects at a larger geography than just a local authority or sub-region;

  • Ensuring that strong governance, leadership and public/private sector partnerships are in place so central government has the confidence to support proposed investments; and

  • Making sure there is constructive and open dialogue with national infrastructure bodies and agencies that want to be involved early to help maximise the impact of potential investment.

Gunne-Jones added: “Central agencies should also engage more closely with local areas to understand development opportunities that may impact on central plans and networks. And central government should set out more clearly the ‘rules of the game’ for devolution and be clear about the priorities and the direction of strategy.”

LEPs have identified areas including transport and housing as main areas for funding, which NLP says fits in with the government’s growth agenda. The partnerships are set to receive £17 billion of public funding and matched private finance for investment through Growth Deals between now and 2021.