Britain’s public sector investment levels are on par with France, Germany, Italy, or Spain’s (hereafter EU-4). Within public investment, there is one category where Britain consistently out-invests its EU-4 counterparts: transport.
Britain invests 0.95% of GDP per year on transport infrastructure like roads, railways, and trams. That’s 22% higher than the OECD average of 0.78%. Germany, France, Italy, and Spain all invest less than us.
The purpose of investment, whether in new equipment or new infrastructure, is to acquire long-lasting assets that generate an income or improve productivity. International comparisons of investment tend to measure the total amount invested, represented as a share of GDP. This is a measure of an input–e.g. how much is spent on high speed rail–not an output–e.g. the amount of track built. This is a problem, because past research from Britain Remade has found large differences in the cost of building new infrastructure. Some projects cost a lot more, such as HS2, a high-speed railway line under construction between London and Birmingham. Per mile of track, HS2 will cost at least 15 times more than France’s Tours-Bourdeaux high speed line.1
Britain Remade has collected spending data from 345 transport projects across 21 countries, including 121 road projects and 224 rail and tram projects. Outside transport, Britain Remade and Centre for British Progress have also analysed spending data on every nuclear project built since 2000 — 36 projects in total.
In each area, British projects are significantly more expensive than comparable projects delivered in similar European countries. Analysis from the Centre for British Progress, which controlled for a range of factors, shows that Britain pays an infrastructure cost premium of between 23% and 93%, depending on the type of project.2
| Infrastructure Type | Cost Premium relative to average of Germany, Italy, Spain, France, South Korea and Canada |
| Road | 23% |
| Rail and Tram | 93% |
| Nuclear | 53% |
Britain could, it follows, produce the equivalent of a large increase in public investment merely by holding existing levels of spending constant if build costs were reduced to European levels. Britain’s infrastructure cost premium implies that, each year, £8.3bn worth of infrastructure is funded but not delivered. Over a five-year Parliament, this represents the equivalent of a £41.5bn investment shortfall. If we reduced building costs to the same level as other European countries, the same infrastructure budget would deliver the equivalent of a £122 per person annual increase in transport spending.
This paper analyses Britain’s investment shortfall in the context of the country’s infrastructure cost premium. The paper is divided into three sections. In the first section, the UK’s persistently low-levels of investment over the past three decades are summarised and analysed. The second section looks at the UK’s infrastructure cost premium. Using data from 345 infrastructure projects, it establishes that outside of the US and Canada, Britain is the most expensive country in the world to build new transport infrastructure. The third and final section assesses the impact of reducing the UK’s infrastructure cost premium to European levels.