The U.K. government will increase spending on infrastructure projects by an annual 3 billion pounds ($4.6 billion) from 2015 as Chancellor George Osborne seeks to boost economic growth.
The measure will raise funding for projects such as road construction, railway extensions and renewable energy by 15 billion pounds over a 10-year period, Osborne said in his budget statement to parliament in London today. Capital spending had previously been set to fall from about 2015, he said.
“By investing in the economic arteries of this country, we will get growth flowing to every part of it,” Osborne said. Cutting infrastructure spending at a time of low growth is not “sensible,” he added.
Osborne, 41, is under pressure to boost growth, which has been hurt by budget cuts and the euro region’s fiscal crisis, after the country lost its AAA credit rating last month. The government today cut its economic growth forecasts for this year and next to 0.6 percent and 1.8 percent, respectively.
Paul Deighton, the former Goldman Sachs Group Inc. executive who helped build London’s 2012 Olympic venues, will lead the government’s renewed drive to expand infrastructure projects across the country, Osborne said.
“Reassigning 3 billion pounds annually from current to capital expenditure is a good move for infrastructure,” Nigel Wilson, Chief Executive Officer of Legal & General Group Plc, the U.K.’s biggest manager of U.K. pension assets, said in e-mailed remarks following the budget. Deighton’s “challenge is not just about finance: it is about speeding the process to deliver more projects, faster,” he added.
Public sector gross investment will remain at 50.4 billion pounds in the 2015 to 2016 period compared with 2014 to 2015, before increasing to 51.3 billion pounds in 2016 to 2017 and to 52.1 billion pounds the following year, the government said in the budget. That’s down from 69 billion pounds in 2009 to 2010, the last year of Gordon Brown’s government.
The failure to build new infrastructure is weighing on growth in an economy that is still 3.2 percent below its peak at the start of 2009, according to gross domestic product data published by the Office for National Statistics in January.
Only 1.2 percent of the 576 projects highlighted in the government’s National Infrastructure Plan have been completed or are operational, the Labour Party said last month.