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I do not wish to make any spurious predictions, especially where Brexit is concerned, but UK Prime Minister Theresa May does seem to be garnering some attention from her erstwhile colleagues in Brussels.
On her recent visit, she reiterated that the UK is prepared to leave the EU without a trade deal. This would appear to have eventually struck a chord with Angela Merkel (albeit not Emmanuel Macron – yet), who has suggested that she is sure that compromises from both sides will allow a deal to be done. I suggest the trade deal itself should be a relatively simple win; it’s all the remaining politics that will no doubt prove controversial.
However, we understand that Michel Barnier is already working on a draft Brexit treaty, so promising news indeed. Maybe the slim prospect of Jeremy Corbyn getting into power has scared the EU into getting things moving. In any event, both sides need to break the current deadlock and make some convincing progress. Back home, UK growth is still struggling and with all the fears around Brexit, why isn’t the government encouraging more general infrastructure spend? I am not meaning the large headline projects such as Silvertown Tunnel, A303 Bypass and Lower Thames Crossing et al.
The country sorely needs the more traditional PFI-style social infrastructure spending such as schools and NHS services. There has never been a cheaper time to borrow for these type of long-term projects, making the costs highly competitive with a surfeit of debt providers eager to lend. Long-term rates are still at very low levels and with competitive loan margins on offer, a typical all-in long-term cost of funds would be around 3%. In addition, sterling is still weak, and likely to remain so for some time, making UK infrastructure an attractive opportunity for overseas investors. Providing that the procurement is undertaken correctly, these projects should demonstrate genuine value for money. Admittedly, the funding structure may need yet another name that does not contain ‘PFI’ but the fact remains that this type of spending will benefit all. It should help to promote growth, provide jobs and boost the economy.
Despite countless calls by various politicians over recent years to invest in infrastructure, there has been little impetus on the traditional smaller projects and frankly insufficient focus in general. Surely the government should demonstrate the UK is still open for business and add some evidence that we are keen to ‘crack on’ and provide a flavour of what the economy may be like post Brexit, irrespective how things turn out.
This article originally appeared in the November edition of Partnerships Bulletin.
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