The Economic Case for Transformational Infrastructure

Economic Case for
Graham Russell
AMION Consulting
June 2014
• Economic rationale for transformational infrastructure
• Measuring economic impact
• Case studies: forecast economic impact
o Liverpool 2 and the Manchester Ship Canal Ports
o Mersey Gateway
o HS2 - Curzon
o Bristol Arena
• Realising the transformational benefits
Economic rationale (1)
UK National Infrastructure Plan
Infrastructure must strengthen and drive the economy, create jobs and act as a
key enabler for future economic development and rising living standards across
the whole country...
• Infrastructure can:
o Raise economic growth
o Increase productive capacity
o Promote agglomeration benefits
o Generate significant positive spillover effects
Need for investment
o Meet current demand through the renewal and upgrading of existing
o Meet future demand and create spare capacity and allow flexibility
o Grow within a global economy
o Address key issues including climate change and energy security
Economic rationale (2)
• BUT – the UK performs relatively
poorly in terms of infrastructure
investment by global standards
World Economic Forum (2013-14)
UK is ranked 28th in terms of “quality
of overall infrastructure”
• Reasons for under-investment (or sub-optimal investment) include:
o Large initial capital cost
o High risk
o Benefits often accrue over the long-term
o Necessary but not sufficient investment
o Complex interconnections and complementarities
• Understanding the potential economic impacts is essential to making
informed investment decisions
Measuring the economic impact (1)
• Economic impact assessment - impact on the local/national economy
(Cost Benefit Analysis – full welfare costs and benefits)
• Effects arise through inter-related mechanisms
o primary: short-term and permanent employment created by the
o secondary: additional economic activity from supply linkage and income
multiplier effects
o tertiary: broader impact of the infrastructure in generating additional
economic activity and other quantifiable benefits
o wider: a range of less tangible impacts (positive or negative externalities)
such as image and environmental impacts
Measuring the economic impact (2)
• Timing of impacts
o Construction phase or activity
o Operational phase or activity
o Persistence
• Nature of the impacts
o Outputs, outcomes and impacts
o Outcomes/impacts
Potential benefits may include:
Employment and labour market
Gross Value Added (GVA)
Students and trainees
Property market impacts
Residential units
Wider impacts
• Additional impacts
Measuring the economic impact (3)
• Additionality – the key concepts
Multiplier effects
Liverpool 2 and Ship Canal Ports (1)
Port of Liverpool
Port Wirral
Port Cheshire
Port Ince
Port Warrington
Port Salford
Liverpool 2 and Ship Canal Ports (2)
Liverpool 2 represents transformational change
o £300 million investment
o Support 3,140 gross jobs
o Employment opportunities for local communities
Managers and senior officials
Professional occupations
Associate Professional/Technical occupations
Administrative and secretarial occupations
Skilled trades occupations
Personal service occupations
Sales and customer service occupations
Process, plant and machine operatives
Elementary occupations
o Significant up-stream and down-stream multiplier effects
o Support other opportunities – e.g. logistics satellites
Liverpool 2 and Ship Canal Ports (3)
• Manchester Ship Canal Shuttle and Ports will create major new
sustainable growth opportunities
Combined investment of c. £560 million
Support the creation of 11,650 gross jobs
Gross Value Added impact of almost £600 million
Port Salford - UK's first tri-modal inland port facility and distribution park
Port Cheshire – potential linkages with automotive
Port Salford
and chemical sectors within Ellesmere Port
o Port Ince – enable the delivery of wider strategic plans for
£850 million Ince Resource Recovery Park
Port Wirral
Port Cheshire
Port Ince
Port Warrington
Mersey Gateway
Work started on the Mersey Gateway Project on 7th
May 2014
New six lane toll bridge over the Mersey will open in
Autumn 2017
Important economic benefits:
o 470 permanent full-time equivalent jobs on site during
the construction phase
o 4,640 permanent new jobs as a result of the operation
of the Mersey Gateway, regeneration activity and inward
o £61.9 million a year in Gross Value Added from the new
jobs by 2030
o Support sustained growth of key assets including
Liverpool John Lennon Airport
HS2 – Curzon Masterplan
HS2 one of the largest infrastructure projects in the UK
Phase 1 will link London to Birmingham
HS2 station - focus for Curzon Masterplan
Need to ensure station is fully integrated with wider proposals
for the delivery of 600,000 sq m of employment floorspace
Focus on design:
o Ensure station does not act as a barrier/constraint to growth
o maintain and enhance linkages between the City Centre and key
growth locations
o Ensure the station acts as a focus for investment
Potential to support 30,150 gross jobs
Annual net additional GVA impact of £823 million
Bristol Arena
• 12,000 capacity arena venue located within Temple
Quarter Enterprise Zone
• Mayoral investment priority
• Create a major new destination adjacent to Temple
Meads station
• Potential to support more than 900 jobs
• Significant catalytic effects
o Image and perceptions
o Enhanced access infrastructure
o Accelerate redevelopment of major opportunities on
adjacent sites – potential for a further 800 gross jobs
• Opportunity to capture significant Business Rates
Realising the transformational benefits (1)
• Comprehensive and consistent long-term vision/plan – at national,
regional and sub-regional levels
• Public sector appraisal/accounting – focus on net additional
economic returns
• Private sector investment – given limited public sector resources
• Planning system – more efficient and effective
• Compensation – compensating those adversely affected
Realising the transformational benefits (2)
• Forward planning – designing in flexibility and capacity
High quality – if sustainable benefits are to be achieved
Effective delivery – getting the right people and leadership
Integrated programme/portfolio of investments - ‘critical mass’,
sequencing and linkages
Partnership working – using the know how and resources of public
and private sector partners
Evidence-based – learning the lessons