Latest Public Sector News

22.09.15

Public sector construction pipeline deemed 'erratic & unreliable' after billions of pounds of spend drops off it

The government’s construction ‘pipeline’, created to give the supply chain clarity over upcoming spending, is “incomplete, erratic and unreliable” according to a new review, which has found that projected spending worth billions of pounds has simply disappeared from it.

Accountancy giant KPMG analysed the data and suggested the missing projects hint at departmental attempts to ‘pause’ projects ahead of expected decisions to scrap them in the upcoming Spending Review on 25 November. 

The firm’s analysis report indicated a total drop of almost 30% in the number of construction and infrastructure projects since the previous analysis in December 2014, equating to 886 total projects vanishing from the “incomplete, erratic and unreliable” pipeline.

Most of this (£6.7bn) came from transport, though some of it was more a recalculation than a cancellation – for example, Crossrail saw a £2bn decrease in its pipeline value because of spend actually incurred in the previous year.

This was followed by housing and regeneration projects, of which £2.8bn disappeared, relating to the completion of Decent Homes Backlog projects and several ‘affordable housing’ programmes also completed.

The analysis also revealed that almost 2,000 projects (nearly 80%) did not even specify a construction start date, which KPMG believes raises questions about the completeness of the data.

Richard Threlfall, KPMG’s UK head of infrastructure, building and construction, said: “It is clear more needs to be done to improve the consistency and accuracy of the government’s construction pipeline. A stable pipeline would give the construction industry good visibility of future demand and the ability to plan and invest for that demand.

“Instead we have a pipeline whose data is so incomplete, and which fluctuates so wildly and erratically, that the industry can place no detailed reliance on it.

“I hope that we will get a clearer picture in November when the Spending Review is published. But in the meantime, the huge 28% drop in the number of projects included suggests some government departments are putting projects on hold in the expectation that they get culled. I don’t expect we will see anything like the scale of cutback in capital programmes that the industry experienced in 2010, after the last election, but there is clearly cause for nervousness about the potential squeeze in spending.”

But transport and energy continue to dominate the pipeline despite the marked decrease, with nearly 70% of it (£82.1bn) allocated to these two sectors alone – despite only contributing 9% of the entire pipeline projects by volume.

Defence, justice and police forces projects account for 74% of projects by volume, but only 10% (£11.4bn) of total allocated spend. Spend in these sectors relates to refurbishment, maintenance programmes and minor improvements and works.

Threlfall added: “I hope the government will recognise that what this industry most needs is long-term certainty and stability in demand, to provide it with the confidence to invest in technology and its workforce.

“Our growing economy is creating a welcome uplift in private sector demand, but the government should not use that as an excuse to cut back its own investments, create another hiatus, and send ripples of uncertainty through the industry.”

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