The Economic Case for Transformational Infrastructure

Report
Economic Case for
Transformational
Infrastructure
Graham Russell
AMION Consulting
June 2014
1
Structure
• 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
2
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
infrastructure
o Meet future demand and create spare capacity and allow flexibility
o Grow within a global economy
3
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
4
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
infrastructure
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
5
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
impacts
Gross Value Added (GVA)
Students and trainees
Property market impacts
Residential units
Wider impacts
• Additional impacts
6
Measuring the economic impact (3)
• Additionality – the key concepts
o
o
o
o
o
Leakage
Displacement
Substitution
Multiplier effects
Deadweight
7
Liverpool 2 and Ship Canal Ports (1)
Port of Liverpool
Port Wirral
Port
Cheshire
Port Cheshire
Port Ince
Port Warrington
Port Salford
8
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
9
Liverpool 2 and Ship Canal Ports (3)
• Manchester Ship Canal Shuttle and Ports will create major new
sustainable growth opportunities
o
o
o
o
o
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
10
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
investment
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
11
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
12
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
13
uplift
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
14
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
15

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