Perspectives on Infrastructure: Investment opportunities in the UK

In the first interview of the series, Sue Kershaw of Costain shares her views on investment in infrastructure

15 September 2020
Sue Kershaw of Costain

Sue Kershaw joined Costain as Managing Director of its transport division in March 2020, taking responsibility for the highways, rail and aviation sectors and joining the Group’s Executive Board. As President of the Association of Project Management and a member of the Mayor of London’s Infrastructure Advisory Panel, she joined Costain from the Infrastructure Advisory Group at KPMG.

Speaking in July, Kershaw says Costain has been fortunate as an organisation in how COVID-19 has impacted over the last four months: “Highways England immediately designated all people working on their sites as keyworkers, and with fewer cars on the network we could get more work done on those projects,” she says. “Network Rail’s immediate response was to close down, but then they too realised that with fewer people travelling projects could continue. So, a lot of work carried on as normal, if not faster, with COVID provisions.”

More generally, she is also now optimistic that the pandemic is going to spearhead a new era of infrastructure investment, encouraging both public and private investment in the UK. “It is seen as a real Eisenhower moment,” she says. “There is a view that we must invest and the best thing to invest in to get people back to work is infrastructure.”

The government’s Project Speed, announced on 30 June 2020, includes a £5 billion capital investment package focused on schools, hospitals, roads and rail, with a remit to build ‘better, greener and faster’. “That initiative is real,” says Kershaw, pointing to Network Rail’s Croydon Area Remodelling Scheme which “had a proposition within days” of the announcement. “There’s a real momentum and an impetus to do something to help everybody, not just the people working on the projects,” says Kershaw. “Project Speed is very positive and will, I believe, see even more money injected into infrastructure.

She predicts that the current policy overhaul will deliver long term changes to infrastructure finance, particularly with regards to policy and regulation. “Having worked for the Department for Transport for a while, I know that the way policy has come about has not changed for decades. We need policymaking to be much more agile, and right now we have people actively looking across the entire portfolio to decide on the best things to accelerate. Traditionally, policymakers have tried to defer decisions on investment – now, people are really trying to do things better and share thinking, which never happened before COVID.

What she would like to see is the government putting more weight behind its infrastructure commitments. “Infrastructure needs a focus. There has never been a Minister for Infrastructure, despite the sums of money involved. It has always between split between the Department for Transport and the Department for Environment, Food & Rural Affairs. What would really help would be a laser-like focus, with the best of government working together to come up with an infrastructure plan.

When we conducted our YouGov survey of 250 infrastructure investors and decision-makers back in December 2019, the creation of a UK national infrastructure finance institution was strongly supported. Kershaw agrees that could make a real difference: “What would be fantastic would be if it looked at infrastructure funding from a portfolio perspective, taking the top five or six projects in the UK and looking at how they could be funded using a risk-based approach, putting together several scenarios and then working through what could happen in practice,” she says. “If that was led by someone well-respected it could really spread its wings and inject some innovative funding into projects and programmes that are just about to start.

While we are still waiting for the National Infrastructure Strategy, she says the impetus since COVID-19 has been much less London-centric: “There’s a real movement in the regions, for the first time ever, to have a proper integrated approach to transport and regeneration. A lot of local councils are realising they need help in doing things, having suffered a brutal loss of funding, and there’s now a huge energy anywhere north of London to make this happen.

At the same time, decarbonisation and biodiversity are being given due consideration and the pandemic has done nothing to dampen investor commitment to ESG.

What does need shaking up is the procurement process. “We have to decide what procurement is going to look like post-Brexit,” says Kershaw, “because at the moment it is perceived to be too difficult to streamline and make relevant. There are huge opportunities to have really short, sharp procurement processes, to welcome SMEs into tier 2 and tier 3, and to make it incredibly simple.

When it comes to funding structures, the trend will inevitably continue to be towards revenues sourced from usage rather than taxation. She says: “There has got to be that shift. With autonomous and electric cars, the old model of taxation at the pump is just outdated. Transport for London put up the congestion charge during the lockdown, partly to keep people out, and they did that at the flick of a switch. That’s extremely powerful, and it is then up to users whether they want to pay.

Kershaw’s priority for the year ahead is the next phase of HS2, which she says the National Infrastructure Commission wants to get off the ground, probably with private funding, and which the industry as a whole is very keen on.

Overall, she is bullish about the outlook for UK infrastructure finance as she settles into her new role. “To me, the pandemic has made people work together better – contractors, consultants, government, local authorities and end users – which is something that we have never seen before. We must grab that and work closely with clients to deliver what they really need as opposed to what they want,” says Kershaw.

She concludes: “The ways of working during lockdown have broken down barriers in terms of getting to know people, which will help us start to do things better. It is just so good that infrastructure is leading that.

If you would like to find out more or have any questions, please contact Chris Jackson, Head of Infrastructure.

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Perspectives on Infrastructure: Investment opportunities in the UK

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