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Road Building Bonanza Ahead - UK Government advises construction companies to prepare for £24 billion of road investment in the next parliament

This week, the Roads Minister Robert Goodwill publicly advised Britain’s road building companies to prepare for "a massive increase in work ahead of the biggest investment in the road network since the 1970s".

The government is tripling funding on the road network over the next 8 years with more than £24 billion to be spent on upgrading and improving the network until 2021.

By the end of the next parliament, the government plans spending of £3 billion each year on improvements and maintenance for the strategic network alone. This locked-in funding commitment is stated as likely to support nearly 30,000 new jobs across the construction sector and at the same time deliver a safer, more sustainable road network that is fit for the 21st century and beyond.

Graphic from the 'Transforming England's strategic road network' leaflet. Graphic displays the investment in yearly amounts including spending rounds of October 2010, November 2011, December 2012, June 2013 and pre-October 2010.
Graphic from the 'Transforming England's strategic road network' leaflet. Graphic displays the investment in yearly amounts including spending rounds of October 2010, November 2011, December 2012, June 2013 and pre-October 2010.

With £24 billion secured for road building over 6 years and £50 billion for the strategic road network over the next 15 years Roads Minister Robert Goodwill said "we need to make sure everyone is ready to deliver the massive programme of investment that we need to keep Britain’s roads moving."

To do that, we need to make sure we have the right people and equipment in place to deliver the 53 road schemes in preparation right now, plus the next generation of improvements over the next 7 years. This means taking on more apprentices and making sure suppliers have the capacity to deal with the increase in demand. If we get this right, this will provide road users with a high performing network that can cope with the expected 43% increase in traffic over the coming decades that will help boost economy growth and deliver more efficient roads for motorists.

Along with investing £10.7 billion in major improvements for our strategic roads from 2015 to 2020/21, the government is also investing £6.1 billion in resurfacing 80% of the strategic network, with another £6 billion being spent on tackling potholes on local authority roads.

 

Highways Agency to become a government-owned company

The funding was announced in the 2013 Spending Review along with the Department for Transport’s ‘Action for Roads’ - a paper that sets out the government's long-term vision for the road network from 2015.

The reforms will also see the Highways Agency turned into a government-owned company, intended to improve commercial efficiency and cut running costs. Road users are promised a more effective road network and will have a greater say in how their roads operate, with taxpayers expected to benefit from savings of at least £2.6 billion over the next 10 years.

The government consultation on the changes to the Highways Agency has now closed and a response is promised for publication "in the near future".

 

Estimations of growth based on rising fuel efficiency and very optimistic guesses of future oil price growth

It is interesting to note that the DfT's actual traffic data shows no rise in overall traffic from 2007 levels (i.e. prior to the financial crisis) - and that road minister's figure of 43% is modified down from the previous, selectively, chosen headline growth estimation.

Traffic growth of 46% is suggested in ‘Action for Roads’ to 2040; based on a central estimate from a 24% estimation envisioning lower than predicted economic growth and other factors.

The Road Transport Forecasts 2013 - Results from the Department for Transport's National Transport Model published at the same time in fact projects a central forecast from 2010-2040 traffic to grow by an average of 43% for all roads.

The NTM projects that traffic will be sluggish up to 2015 in line with projected low GDP growth and high fuel costs. As England then moves out of the recession and rapid fuel efficiency improvements significantly decreasing the fuel cost of driving, traffic is expected to rise by 19% from 2015 to 2025. As the rate of improvements in vehicle fuel efficiencies declines after 2025 we observe a slower growth in traffic. The central forecast from 2010-2040 projects traffic to grow by 41% for Non-SRN roads, 46% for SRN and an average of 43% for all roads.

A huge variable glossed over is oil price. The NTM relies on DECC projections of October 2012 looking ahead to 2030, that suggests very low variability between low and high forecast price of just $20 per barrel - an the estimation for 28 years ahead assuming a highly optimistic $10 per barrel lower price than in 2012 and the high basis just $10 per barrel above that in 2012.

Charles Russell, director of transport consultancy Steer Davies Gleave has speculated that measures of personal disposable income may be a better guide to traffic growth as "the apparently iron relationship between economic and traffic growth was actually beginning to look shaky in the early levels of the last decade: since 2007, with the financial crisis and the ongoing subsequent recession, the picture has changed dramatically."

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