LNB News 03/03/2021 96
In the Spring Budget 2021, on 3 March 2021, the Chancellor of the Exchequer, the Rt Hon Rishi Sunak MP, announced a new UK Infrastructure Bank, £1bn from the Towns Fund for a further 45 Town Deals across England, support for offshore wind ports infrastructure, a Modern Methods of Construction (MMC) Taskforce and a National Infrastructure Commission (NIC) Towns and Regeneration study, among other things. Jason Raeburn, senior associate at Baker McKenzie, comments on the measures announced and the impact on construction.
The Spring Budget 2021 follows a year of extraordinary economic challenge as a result of the ongoing coronavirus (COVID-19) pandemic. Like that of many other countries, the UK’s economy has been hit hard, with both the direct effects of the virus and the measures necessary to control it leading to an unprecedented hit in many sectors. The Budget sets out how the government will extend its economic support and to work towards ‘protecting the jobs and livelihoods of the British people’, ‘strengthening public finances’ and the implementation of an ‘investment-led recovery’ in line with the easing of social distancing rules and the reopening of the economy in the government’s road-map.
The parts of the Budget that are relevant to construction lawyers are summarised below.
UK Infrastructure Bank
The Chancellor has announced the formation of a new UK Infrastructure Bank, headquartered in Leeds, which, according to the government, ‘will harness the skills of our engineers and the innovation of our architects and designers to make major new projects a reality’. HM Treasury has released a Policy Paper on the subject of the bank, which contends that its main role will be to ‘provide leadership to the market in the development of new technologies, crowding-in private capital and managing risk through cornerstone investments and a range of financial tools’, and its core objectives will be to help combat climate change, particularly in relation to the UK’s commitments to its 2050 net-zero emissions target, and ‘support regional and local economic growth through better connectedness, opportunities for new jobs and higher levels of productivity’. The government is also to look at expanding the bank’s environmental objects. For instance, by looking at how to improve the UK’s natural capital.
The bank, which will draw capital from HM Treasury and have the ability to borrow from the private sector, will have access to £22bn, consisting of £12bn of equity and debt capital and the ability to issue £10bn of guarantees. The paper also states that the bank will form an essential part of its ‘the government’s broader infrastructure strategy, complementing the existing expertise of the Infrastructure and Projects Authority (IPA) and the National Infrastructure Commission, and working alongside the policy levers of central government’.
According to Raeburn: ‘Whilst the UK has a strong infrastructure finance market, there are certain projects which face shortfalls, where the potential for positive impact on climate change may be high, but the ventures themselves are vulnerable to market failure – resulting in reduced investment. The Budget seeks to use the new UK Infrastructure Bank to plug that gap.’
The Ministry of Housing, Communities and Local Government (MHCLG) is to establish the MMC Taskforce, which is designed to help expediate the building of MMC Homes in the UK. Based in Wolverhampton and supported by £10m in seed funding, the MMC Taskforce will include experts from government and industry, who will work alongside local authorities and Mayoral Combined Authorities, to accelerate the adoption of modern methods of construction.
Global Centre for Rail Excellence
The Chancellor has announced that the government is to match fund up to £30m, subject to the business case presented, towards the construction of a Global Centre for Rail Excellence in Wales, which will test stock and infrastructure. This supports funding already promised from the Welsh Government and the private sector, with the centre designed to be a ‘world-class train testing facility’ that would test new technology and support innovation in the UK rail industry.
More information on the centre can be found on the Welsh Government’s website here.
NIC Towns and Regeneration study
The government is to commission a new NIC study on the subject of towns and regeneration, which is to look at how best to maximise the benefits of infrastructure policy and investment for English towns. However, recommendations in reserved areas will also be applicable for the rest of the UK as well. The study will especially focus on transport and digital infrastructure. The NIC is to deliver its final report, which will outline recommendations, to the government by the end of September 2021.
Further information on the study has been published by HM Treasury here.
The Chancellor has confirmed that the government is to provide £1bn from the Towns Fund for a further 45 Town Deals throughout England, including Crawley, Margate, Bolton, Carlisle, Wolverhampton, Ipswich, and Milton Keynes. According to the Chancellor, the funding will help regional towns ‘level up’, aid local recovery from the impacts of the ongoing coronavirus pandemic and allow them to ‘design and implement a growth strategy for their area’.
Offshore wind ports infrastructure
The Chancellor has announced that the government is ‘to make an offer of support, in principle, to the Able Marine Energy Park on Humberside’ to support ‘the next generation of offshore wind’ following a competition on upgrading ports infrastructure. Similarly, he has stated that the government is to sign a memorandum of understanding with Teesworks Offshore Manufacturing Centre in order to support the development of another offshore wind port hub.
Levelling Up Fund prospectus launch
The government has launched the prospectus for the Levelling Up Fund alongside the Budget, which ‘provides guidance for local areas on how to submit bids for the fund’. Worth £4.8bn, the fund is to invest in various infrastructure projects, including ‘town centre and high street regeneration, local transport projects, and cultural and heritage assets’.
Regional cultural infrastructure
The Chancellor has declared that the government is to invest £18.8m in local cultural infrastructure projects in the English towns of Carlisle, Hartlepool, Wakefield and Yeovil in an effort to ‘boost the vibrant cultural life of these towns and cities’.
A66 development funding
The government is to provide £135m in an effort to speed up construction on the A66 Trans-Pennine upgrade to 2024.
Intra-city transport settlements
The Chancellor has announced that, in keeping with the commitments of the 2020 Budget, the government is to ‘invest £4.2bn in intra-city transport settlements from 2022–23 through five-year consolidated funding settlements’. City regions affected include Greater Manchester, Liverpool City Region, West Midlands, West Yorkshire, Sheffield City Region, West of England and Tees Valley. However, it is noted that this is ‘subject to the creation of appropriate governance arrangements to agree and deliver funding’.
Investments in local railways and stations
According to the Budget, the government is to invest £59m in the construction of five new railway stations based in the West Midlands in an effort to cut journey times. In addition, the government is to use £40m to ‘reinstate passenger services on the OkehamptonExeter line, subject to final approval of costs and contracts’.
The Chancellor has announced that the flood and coastal defence programme for England, worth £5.2bn, is to begin in April 2021. It is expected that schemes in Waltham Abbey, Sunderland, Preston, Warrington, Salisbury, Rotherham and Doncaster will begin construction in 2021–2022. The government contends that the schemes will ‘better protect over 3,700 homes from flooding’.
Community Ownership Fund
The MHCLG has announced a new Community Ownership Fund worth £150m, to be launched in June 2021 for communities throughout the UK to support local facilities, community assets and amenities. This is in an effort to put a stop to the loss of community pride that occurs when local amenities are shut down.
From summer 2021 community groups will have the opportunity make bids of up to £250,000 matched funding to acquire local facilities, such as pubs, theatres and sports teams, that are at risk of being closed or discontinued. This is part of the government’s wider ‘levelling up agenda’, a which seeks to invest in infrastructure that improves everyday life across the UK through the regeneration of town centres and high streets.
A full bidding prospectus detailing the purpose of the fund and how to structure a bid is expected to be published in June 2021, near the time of the first bidding round for the Community Ownership Fund. Bids will be accepted from community and voluntary organisations across the UK.
The government has no plans to publish a definitive list of eligible assets, leaving it to each community to determine what is important to them.
More information on the Community Infrastructure Fund can be found here.
The government’s Build Back Better plan, which was published alongside the Budget, may also be of interest, and can be found here.
Written by Tom Inchley