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Economic Case for Transformational Infrastructure
Graham RussellAMION Consulting
June 2014
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Structure• Economic rationale for transformational infrastructure
• Measuring economic impact
• Case studies: forecast economic impact
o Liverpool 2 and the Manchester Ship Canal Ports
o Mersey Gateway
o HS2 - Curzon
o Bristol Arena
• Realising the transformational benefits
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Economic rationale (1)
• Infrastructure can:o Raise economic growth o Increase productive capacity o Promote agglomeration benefitso Generate significant positive spillover effects
• Need for investmento Meet current demand through the renewal and upgrading of existing infrastructureo Meet future demand and create spare capacity and allow flexibilityo Grow within a global economyo Address key issues including climate change and energy security
UK National Infrastructure PlanInfrastructure must strengthen and drive the economy, create jobs and act as a key enabler for future economic development and rising living standards across the whole country...
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Economic rationale (2)• BUT – the UK performs relatively
poorly in terms of infrastructure investment by global standards
World Economic Forum (2013-14)
UK is ranked 28th in terms of “quality of overall infrastructure”
• Reasons for under-investment (or sub-optimal investment) include:
o Large initial capital cost
o High risk
o Benefits often accrue over the long-term
o Necessary but not sufficient investment
o Complex interconnections and complementarities
• Understanding the potential economic impacts is essential to making informed investment decisions
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Measuring the economic impact (1)• Economic impact assessment - impact on the local/national economy
(Cost Benefit Analysis – full welfare costs and benefits)
• Effects arise through inter-related mechanisms
o primary: short-term and permanent employment created by the infrastructure
o secondary: additional economic activity from supply linkage and income multiplier effects
o tertiary: broader impact of the infrastructure in generating additional economic activity and other quantifiable benefits
o wider: a range of less tangible impacts (positive or negative externalities) such as image and environmental impacts
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Measuring the economic impact (2)• Timing of impacts
o Construction phase or activityo Operational phase or activityo Persistence
• Nature of the impactso Outputs, outcomes and impactso Outcomes/impacts
• Additional impacts
Potential benefits may include:
Employment and labour market impactsGross Value Added (GVA)Students and traineesProperty market impactsResidential unitsWider impacts
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Measuring the economic impact (3) • Additionality – the key concepts
o Leakageo Displacemento Substitutiono Multiplier effectso Deadweight
Liverpool 2 and Ship Canal Ports (1)
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Port Wirral
Port Cheshire Port Ince Port Warrington Port Salford
Port of Liverpool
Port Cheshire
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Liverpool 2 and Ship Canal Ports (2)• Liverpool 2 represents transformational change
o £300 million investmento Support 3,140 gross jobs o Employment opportunities for local communities
o Significant up-stream and down-stream multiplier effectso Support other opportunities – e.g. logistics satellites
Managers and senior officials
Professional occupations
Associate Professional/Technical occupations
Administrative and secretarial occupations
Skilled trades occupations
Personal service occupations
Sales and customer service occupations
Process, plant and machine operatives
Elementary occupations
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Liverpool 2 and Ship Canal Ports (3)• Manchester Ship Canal Shuttle and Ports will create major new
sustainable growth opportunitieso Combined investment of c. £560 milliono Support the creation of 11,650 gross jobso Gross Value Added impact of almost £600 milliono Port Salford - UK's first tri-modal inland port facility and distribution parko Port Cheshire – potential linkages with automotive and chemical sectors within Ellesmere Porto Port Ince – enable the delivery of wider strategic plans for £850 million Ince Resource Recovery Park
Port Wirral Port Cheshire Port Ince Port Warrington
Port Salford
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Mersey Gateway• Work started on the Mersey Gateway Project on 7th May 2014
• New six lane toll bridge over the Mersey will open in Autumn 2017
• Important economic benefits:o 470 permanent full-time equivalent jobs on site during the
construction phaseo 4,640 permanent new jobs as a result of the operation of the
Mersey Gateway, regeneration activity and inward investmento £61.9 million a year in Gross Value Added from the new jobs by
2030o Support sustained growth of key assets including Liverpool John
Lennon Airport
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HS2 – Curzon Masterplan• HS2 one of the largest infrastructure projects in the UK
• Phase 1 will link London to Birmingham
• HS2 station - focus for Curzon Masterplan
• Need to ensure station is fully integrated with wider proposals for the delivery of 600,000 sq m of employment floorspace
• Focus on design:o Ensure station does not act as a barrier/constraint to growtho maintain and enhance linkages between the City Centre and key
growth locationso Ensure the station acts as a focus for investment
• Potential to support 30,150 gross jobs
• Annual net additional GVA impact of £823 million
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Bristol Arena• 12,000 capacity arena venue located within Temple
Quarter Enterprise Zone• Mayoral investment priority• Create a major new destination adjacent to Temple
Meads station• Potential to support more than 900 jobs• Significant catalytic effects
o Image and perceptionso Enhanced access infrastructureo Accelerate redevelopment of major opportunities on
adjacent sites – potential for a further 800 gross jobs
• Opportunity to capture significant Business Rates uplift
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Realising the transformational benefits (1)• Comprehensive and consistent long-term vision/plan – at national,
regional and sub-regional levels
• Public sector appraisal/accounting – focus on net additional economic returns
• Private sector investment – given limited public sector resources
• Planning system – more efficient and effective
• Compensation – compensating those adversely affected
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Realising the transformational benefits (2)• Forward planning – designing in flexibility and capacity
• High quality – if sustainable benefits are to be achieved
• Effective delivery – getting the right people and leadership
• Integrated programme/portfolio of investments - ‘critical mass’, sequencing and linkages
• Partnership working – using the know how and resources of public and private sector partners
• Evidence-based – learning the lessons