The thunderclap of economic consequences enfolded by Covid-19 has compelled Boris to recommit to his election promise of a ‘levelling up’ agenda. Rishi Sunak, Chancellor of the Exchequer, allocated £900m to three hundred ‘shovel ready’ projects which include new commercial spaces and a rapid rail station in Kent. A new taskforce, ‘Project Speed’ led by the Chancellor Rishi is intended to deliver a portfolio of key projects faster. The Home Secretary, Priti Patel, underscored that the investment plan will effectively create jobs but also provide services and economic growth and opportunity across the kingdom.
The project portfolio of infrastructure projects comprises the building of broadband internet highways, schools of the future, new judicial infrastructure including three new prisons and hospitals and homes. These projects will create work for persons whose pre-COVID-19 jobs have evaporated. These plans come amidst looming unemployment projections by this Christmas following the long lockdown. The estimated number of people jobless and claiming work-related benefits in the UK jumped twenty-three per cent to 2.8 million in May.
Since the road to recovery is green, Boris intends to construct two offshore windfarms off the Norfolk coastline. Business Secretary, Alok Sharma, gave the green light to the 1.8GW Norfolk Vanguard windfarm 40 miles off the Bacton coast. The 2.4GW Hornsea 3 windfarm would extend the Hornsea 1 and 2 projects further into the North Sea. Together the two new projects would generate enough clean electricity to power almost 4m homes while creating jobs. These projects enable the UK to maintain its global leadership in offshore wind power. The infrastructure task force is serious about the climate ambitions of the UK and they intend to drive a green post-COVID-19 recovery. The intention is to invest in the UK’s green industries to bolster the economy following the calamitous impact of the coronavirus.
The world invests nearly fourteen per cent of global GDP in infrastructure and real estate. Ailing infrastructure like under optimized sea ports, rising populations, and the demands of economic development are driving countries’ desire to channel more funding into mass transit, water and wastewater management, power, and other systems that catalyse recovery and growth. China was the world’s largest infrastructure market in 2015 with 38 per cent of global spending, followed by North America (21 per cent) and Western Europe (17 per cent). From 2012 to 2017, the fastest-growing markets for infrastructure spending have been India with compound annual growth in real terms of 10 percent, China (7 per cent), and North America (3 per cent). Using a portfolio-optimization process, state agencies in India and China have modified their capital-allocation strategies and public-benefit criteria.
To put COVID-19 stimulus funds to work swiftly, the process of crafting capital budget estimates must be made less laborious and lengthy by using a capital-portfolio-optimization process. Project benefits must be quantifiable and measurable against a public strategy, and time weighted based on when the public can expect to experience the benefit. Time weighting is important in post-COVID-19 recovery scenarios, as similar projects might carry different time lines. The public gains more from selecting the project that finishes earlier. Capital is then allocated based on the expected project benefit compared with those of all other available options. This process is never completed, and is iterated at regular intervals to respond to changes in funding or projected project benefits. This capital-portfolio-optimization process in which the state ranks proposed projects based on their estimated benefits will result in ventures with premier benefits to citizens being funded first. The cutoff point between funded and unfunded discretionary projects depends on how much money is accessible for recovery.
This approach must take into account capital commitments for approved, fully funded, and authorized projects that are underway. Then, there are compliance projects that are mandatory. The next cluster of projects must yield the highest-benefits for capital. They are the highest-benefit projects targeted for immediate capital injection. They must deliver the maximum benefit for available funds and are candidates for full funding allocation. The next group will be those projects that are unfunded. They become prime projects if and when additional revenue becomes available but cannot be funded now. Projects that fail to meet explicitly stated benefit thresholds are eliminated immediately. They are not to be pursued unless the benefit increases and must be removed from the capital plan altogether.
To manage current budgetary constraints and prepare for the next normal, there are three priorities: (1) enhancing user experiences, (2) using flexible models to reduce life-cycle costs and increase asset productivity, and (3) exploring alternative delivery mechanisms to unlock new revenue streams and the use of public–private partnerships to stretch funding.
Projects that are not core to the recovery strategy must be delayed. Others are eliminated that may decline in value over the next decade by taking a broader view of what qualifies as a capital project – such as digitization. It is sensible to defer some low-benefit projects that have been approved or those that have begun early construction and shift that capital to higher-benefit priorities. Repositioning of capital budgets to refocus on evolving priorities and improving operational resilience is a priority for recovery.