Are we on the verge of a new funding model for transport?
An independent review commissioned by the Labour Party has called for the UK government to adopt a European-style model of Public-Private Partnerships (PPPs) to finance major transport projects. The review, led by former Siemens UK chief executive Juergen Maier and produced by the Urban Transport Group (UTG), emphasised the need for a more integrated partnership between the public and private sectors to address the country’s pressing infrastructure needs.
The report suggests that the National Infrastructure Council, an advisory group within the Labour Party, should devise a new approach to attract private investment into road and rail schemes. It recommends that the British Infrastructure Council (BIC), a panel of industry leaders from companies such as Lloyds, HSBC, and US firm BlackRock, be tasked with formulating high-level proposals by the end of 2024. These proposals should be presented to the Secretary of State for Transport and the Chancellor, though the BIC currently has no formal role in government.
The UTG report argues that the UK government should look to successful PPP models from Europe and Asia. These models often blend public sector funding, including grants and land, with private sector investment through debt and equity financing. The use of Special Purpose Vehicles (SPVs), which mix debt and equity, is proposed as a way to mitigate risks and ensure that projects are delivered on time and within budget.
Capturing the indirect economic benefits of transport projects, such as increased land and property values, is highlighted as a crucial method for generating new revenue streams to attract private investment. The report points to successful examples like the Northern Line extension to Battersea and London’s Crossrail, where the uplift in business rates was used to repay initial financing. The UTG calls for further exploration and standardisation of such land value capture models.
To support the implementation of these partnerships, the report advocates for the development of an Infrastructure Investment Playbook. This playbook would provide a framework for accelerating private investment in transport projects by setting out the government’s preferred approaches and models, clarifying the roles of public and private actors, and offering guidance on assessing the viability of projects for private financing. The playbook would also include a transparent project pipeline to build certainty and confidence among private investors.
Long-term certainty for investors and the supply chain is another key recommendation. The report calls for a 10-year infrastructure plan, overseen by the emerging National Infrastructure and Service Transformation Authority (NISTA), to insulate transport projects from short-term political changes. This would help ensure the stability and predictability needed to attract private sector participation.
Additionally, the report stresses the importance of building local capacity. It recommends increased support for local authorities, including financial stability, revenue-raising powers, and upskilling in project management and financing. The report also suggests creating formal mechanisms for sharing best practices across local authorities to better leverage private sector expertise.
The review also highlights the need for fostering innovation and technology adoption in transport projects. The government is urged to explore the barriers to implementing advanced technologies, such as digital signalling and communication systems, which could reduce costs and improve project delivery times.
Transport Secretary Louise Haigh acknowledged the potential influence of the report, stating that it would help inform the new government’s thinking on infrastructure investment. The report arrives at a critical time, as the UK faces a “deep and growing productivity gap” between different parts of the country, exacerbated by frequent changes in government policy and a lack of long-term planning.
With tight public finances, the government is considering new funding models, including the potential use of private finance for projects such as a £9bn highway tunnel under the Thames. The review’s recommendations reflect a growing consensus that the UK must embrace more PPPs, akin to those used in Europe and Asia, to revitalise its ailing transport infrastructure and unlock the country’s economic potential.
