There is no doubt that this remains among the most difficult economic environments we have faced in decades. In the wake of the US housing and banking collapse and Eurozone volatility, the impact of the crisis still reverberates far and wide across global markets.
Yet if there is a sliver of silver lining we can take from the current situation, it is that more people are coming to understand the critical role that infrastructure plays in the economic health and development of nations.
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No matter where you look, swathes of government leaders, economists and technocrats are coming out to lend vocal support for greater infrastructure investment to drive jobs and economic growth in moribund markets.
Not just as a means of driving jobs and growth, but because people are coming to recognise that across the globe – in the US, across Europe and in the BRICS, poor infrastructure is slowing growth. Therefore increasing spending on capital investment by governments represents a good investment.
Of course, it is the urgent need for jobs and growth that has focused attention most recently.
A recent European Commission country report recommended the UK “pursue a long-term strategy for improving the capacity and quality of the UK’s network infrastructure”, including transport and energy.
The previous week, it was the International Monetary Fund making a similar recommendation as chief executive, Christine Lagarde, said more investment “would be a good use of the hard-won credibility of fiscal policy”.
Before that, we witnessed stimulus packages for infrastructure investments in the USA and elsewhere. And even the Chinese have stated they plan to up their investment profile both at home and abroad as concerns about growth re-emerge after a recent period when China’s leaders were more focused on inflation and potential overheating in the economy.
The case for massive infrastructure investment is not quite unanimous, but momentum is certainly building behind the idea that far more investment is urgently required to prevent widespread stagnation.
The main argument left now centres on how such investments should be financed and how to maximise public funding and private finance.
In Europe, there is great excitement about the pilot Project Bond programme the EU Parliament agreed to fund at the end of May, which is kicking off with €230 million in the pot. This is a modest start, but a step in the right direction.
Many voices are also advocating greater use of public private partnership (PPP) schemes in all their other guises too, which is crucial as PPP helps mobilise private sector entrepreneurial discipline, innovation and creativity. For example, the UK is launching the Green Investment Bank, while there are a host of initiatives centred around local and regional bond schemes.
And, of course, there are a whole host of firms – including Arup – hard at work helping pension funds, insurance groups, private companies and sovereign wealth funds assess potential projects, with the crucial goal of getting cash off balance sheets and back into the productive economy.
The technical challenges involved in investing in infrastructure and finding the right projects are always complex to navigate …
Yet the argument in favour of infrastructure investment is looking more compelling by the day. That is not only good news for our economic future, but also useful in helping more people to understand just how effective infrastructure investment can be.
After all, the current economic climate presents a win-win-win scenario for the investment case:
Win One – the lowest long-term borrowing rates in living memory mean that there has almost never been a better time to invest. US benchmark borrowing costs recently plunged to levels last seen in 1946 and those for Germany and the UK hit all-time lows.
Win Two – rapid investment in infrastructure is one of the surest ways to spur jobs and economic growth across national economies.
Win Three – investing in long-lived infrastructure generates an asset base that boosts long-term competitiveness and generates further economic benefits long into the future.
No-one imagines for a second that any of this will be easy. Apart from attracting funding in a very risk-averse market, there are real challenges in shaping infrastructure deals that can be made shovel-ready quickly and effectively.
However, it is good to see so many more legislators, economists and commentators coming round to our way of thinking on the importance of greater infrastructure investment.
Not only is this the key to creating jobs and getting the world’s economy back on track, it is crucial for competitiveness in the long term.
This feature originally appeared in Arup and Terry Hill.