LONDON — The government’s pledge to invest £23 billion in infrastructure and innovation projects over the course of the next five years will keep cash flowing into the UK despite Brexit, says Amanda Clack, p
resident of the Royal Institute of Chartered Surveyors.
Clack pointed out that this is is a “really positive step” for the UK economy in an interview with Business Insider.
The huge fiscal boost for the National Productivity Investment Fund, will “drive certainty in the market place” while the Brexit negotiations play out, Clack, who is also head of infrastructure at EY, said.
“I am pleased to see support of the National Infrastructure Commission as the 1-1.2% of GDP being spend on infrastructure will drive certainty in the market place and send a very clear message [to those thinking of investing in the country],” added Clack to BI.
“I think we have seen a real positive step and, while we would always like more [infrastructure funding,] it show what the UK is able to do. It will get Britain building again.”
RICS is the world’s leading body for land, property and construction sectors and has over 120,000 members.
“Raising productivity is essential for the high wage, high skilled economy”
What we need now is to actually respond to that and start getting shovels in the ground
On November 23, Chancellor Philip Hammond delivered the country’s Autumn Statement. Infrastructure and innovation were the key focus and the £23 billion spend is aimed at improving productivity in the UK.
“Raising productivity is essential for the high wage, high skilled economy” Britain wants, he said. Britain’s productivity gap is “shocking,” the chancellor told the House of Commons at the time, noting that the country lags the USA and Germany by 30 points.
“But we also lag France by over 20 and Italy by eight. Which means in the real world, it takes a German worker four days to produce what we make in five, which means, in turn, that too many British workers work longer hours for lower pay than their counterparts,” he added.
To tackle that problem, Hammond announced the new National Productivity Investment Fund. Spending on infrastructure will expand from 0.8% of GDP currently, to between 1% and 1.2%.
“I’d like to say that I think Hammond is listening [to those asking for funding for infrastructure] and it is a very good first step. What we need now is to actually respond to that and start getting shovels in the ground,” said Clack.
Sorting out Britain’s housing shortage
Britain has a housing shortage problem and that is helping boost house prices.
Last year, RICS pointed out in its RICS Residential Survey that UK house prices are expected to rise by 4.5% per annum over the next five years (a cumulative increase of around 25%). The chief economist at RICS said that property will become increasingly “unaffordable” during this time.
In 2016, RICS also pointed out that the UK is also facing a “critical rental shortage” as at least 1.8 million more households will be looking to rent rather than buy a home by 2025.
So when the chancellor also confirmed at the time of the Autumn Statement a series of substantial measures designed to boost house building in the UK, including a £2.3 billion infrastructure fund for housing in high demand areas like London, this was seen as a widely positive move in getting more homes built for tenants.
He reaffirmed the announcement of £1.4 billion to build more affordable homes, as well as bringing in a pilot scheme of Right to Buy in housing associations in Britain’s regions.
These measures represent “a step change in our ambition to increase the supply of homes for sale and rent” and “it will support the construction of up to 100,000 new homes in the areas where they are needed most,” he said at the time.
“It’s not enough for the total housing shortage but it’s a real positive step,” said Clack to BI.
“The fact for me is that the government is recognising the key area for growth in infrastructure, and what is incredibly important, is housing. It is the fourth ‘H’ in terms of key areas of infrastructure at the moment — HS2, Heathrow, Hinkley, now housing.”