Infrastructure cuts spark row over UK growth priorities

BusinessLDN deputy CEO Muniya Barua cautions against framing regional infrastructure investment as a zero-sum game pitting London against the rest of the UK, emphasizing their deep economic interdependence. She argues that shifting funds away from London risks a false dichotomy, as London’s prosperity fuels growth nationwide. This perspective underpins support for Burnham’s pledge to revive the Birmingham to Manchester leg of HS2 using funding models inspired by London projects like Crossrail, illustrating how lessons from capital-centric initiatives can catalyze regional development.

Investment in London infrastructure projects such as Crossrail generates extensive benefits beyond the capital, with 96% of contracts awarded to UK companies and 62% of supply chain businesses located outside London. Barua highlights that these projects create ripple effects across the country, reinforcing the notion that London’s infrastructure success is a national asset. Moreover, large-scale endeavors like HS2 and the Euston station redevelopment are poised to turbocharge London’s role as an economic engine, which accounts for nearly a quarter of the UK economy and contributes significant net tax revenue that supports public spending across all regions.

The UK Prime Minister's £15bn Defence Investment Plan (DIP) is fundamentally reshaping capital allocations by redirecting funds from key road and energy projects, resulting in several initiatives being mothballed rather than outright cancelled. Departments such as the Department for Transport and the Department for Energy Security and Net Zero are tasked with contributing significant savings while still striving to uphold priorities like clean power and infrastructure upgrades, reflecting a delicate balancing act between national security and sustainable development.

To help fund the DIP, the Department for Transport is expected to slash up to £700 million from the third Road Investment Strategy (RIS3), with major projects like the A38 Derby Junctions and A46 Newark Bypass facing potential cancellation. Despite these cuts, the government aims to shield local road maintenance and rail infrastructure, underscoring an effort to reconcile fiscal savings with ongoing commitments to clean energy and transport infrastructure modernization.

Industry leaders have voiced strong concerns that reallocating substantial funds toward defence priorities risks destabilizing transport investment, which is vital for long-term economic and social benefits. They emphasize the necessity of a clear and sustained funding pipeline, faster procurement processes, and enhanced innovation and collaboration to ensure the DIP not only strengthens national security but also translates into operational capabilities and broader economic growth, cautioning that underfunding could lead to costly delays and undermine the UK's infrastructure ambitions.

By mid-2026, governance and funding challenges continue to cloud the delivery of Northern Powerhouse Rail (NPR), with the Public Accounts Committee (PAC) warning that the £45bn funding cap was set prematurely before full project design and costing were completed. The PAC highlighted unresolved issues around routes, service levels, capacity, and governance, echoing concerns that lessons from HS2’s troubled delivery have not been fully learned. In response, the PAC demanded detailed explanations from the Department for Transport and Treasury within six months to bolster transparency and accountability, underscoring the risk that NPR’s ambitious goals remain out of reach more than a decade after its inception.

Industry leaders and consultancy bodies have called for structural reforms to address fragmented governance that hampers infrastructure delivery. An open letter signed by 28 industry figures urged the incoming Prime Minister to maintain commitment to the 10-Year Infrastructure Strategy and establish a dedicated Department for Infrastructure, aiming to unify responsibilities currently scattered across multiple departments. The Association for Consultancy and Engineering emphasized a 'joined-up delivery model,' citing Greater Manchester’s Andy Burnham as a potential champion for this approach, which promises to reduce costs, accelerate benefits, and attract investment by streamlining funding and project management.

Nista’s 2026 annual GMPP report reflects a nuanced picture of UK infrastructure governance, with HS2 remaining in the 'Red' risk category due to unachievable delivery baselines confirmed by correspondence between HS2 Ltd CEO Mark Wild and Transport Secretary Heidi Alexander. Meanwhile, NPR’s risk rating improved from Red to Amber following the securing of an agreed funding commitment of up to £45bn and key scope decisions, such as the Manchester-Liverpool route. This shift aligns with Nista CEO Becky Wood’s description of a more disciplined oversight model that focuses resources where they add the greatest value, enhancing accountability and interdepartmental expertise to strengthen the wider governance system.

The report also highlights the critical role of funding certainty and appropriate financing models in boosting project delivery confidence. The Lower Thames Crossing’s upgrade from Amber to Green status was driven by securing £1.66bn in public funding through Road Investment Strategy 3 and adopting the Regulated Asset Base (RAB) financing model, which Nista credits with 'strengthening confidence in delivery.' This example underscores how clear financial commitments and innovative funding mechanisms can mitigate risks and improve governance outcomes for major infrastructure projects.

By mid-2026, the Government’s Major Project Portfolio (GMPP) reveals a stark financial imbalance, with whole life costs totaling £924.2bn vastly overshadowing projected monetised economic benefits of £603.6bn, resulting in a £320.6bn deficit. Yet, this aggregate masks significant variation across projects; for instance, Defra’s Flood and Coastal Erosion Risk Management scheme stands out with benefits nearly five times its £4.6bn cost, while the Transpennine Route Upgrade’s £11bn price tag yields only £3bn in monetised returns, underscoring the uneven economic viability within the portfolio.

Interpreting these cost-benefit disparities demands nuance, especially given the Ministry of Defence’s outsized £305bn share of the GMPP, where monetising benefits proves inherently challenging or even impossible. As Nista cautions, the conventional cost-benefit framework falls short in capturing the full value of defence and similar projects, which deliver critical but non-financial benefits, thereby complicating straightforward value-for-money assessments and necessitating a broader evaluative lens.

The 2026 Major Projects Annual Report’s novel presentation of all monetary figures in real terms marks a methodological shift aimed at enhancing the accuracy of tracking project costs and benefits over time. While this approach improves temporal consistency within the current report, it simultaneously restricts direct comparability with previous years’ data, adding another layer of complexity for analysts attempting to gauge progress or trends across the GMPP’s evolving portfolio.

Andy Burnham’s premiership is poised to reshape UK infrastructure policy by prioritizing regional connectivity and empowering local leadership, reflecting his tenure as Greater Manchester mayor where he championed projects like an underground rail network and advocated reinstating the northern leg of HS2. His approach emphasizes clear planning, early collaboration, and long-term investment confidence, aiming to replicate the tangible local impacts of devolved powers at a national scale. This delivery-focused mindset could be further institutionalized through structural reforms such as establishing a dedicated Department for Infrastructure to better coordinate investments across sectors and regions.

Burnham’s energy policy stance signals a nuanced shift that balances public control with pragmatic regulation. While he opposes outright nationalisation due to its legal and financial complexities, he favors stronger municipalisation or tighter regulatory frameworks to make energy more affordable. However, his openness to reconsidering the ban on North Sea oil exploration licenses and potentially removing the Energy Profits Levy could slow the transition from fossil fuels by incentivizing new oil and gas investments, creating tension between climate goals and economic considerations.

The energy sector faces critical uncertainty under a Burnham government, as regulatory ambiguity risks deterring the private investment essential for the UK’s net zero ambitions. Given the sector’s reliance on long-term investment signals, Burnham will need to swiftly clarify his regulatory approach to avoid a chilling effect on capital flows, ensuring that infrastructure financing and project delivery do not stall during this pivotal transition.

As the UK infrastructure sector faces mounting challenges, industry leaders have united in an open letter urging the presumed new prime minister to steadfastly support the 10-Year Infrastructure Strategy and to establish a dedicated Department for Infrastructure. This call, endorsed by 28 prominent figures including the Association for Consultancy and Engineering, highlights the current fragmentation of responsibilities across multiple departments, which they argue inflates costs and delays critical projects across transport, energy, water, and digital networks. Political figures like Labour leadership hopeful Andy Burnham are seen as pivotal in championing this unified approach, leveraging regional governance experience to promote a cohesive national delivery model that could streamline funding and project management.

Scrutiny over major infrastructure spending has intensified with the National Audit Office launching an investigation into the Lower Thames Crossing (LTC) project following allegations raised by the Transport Action Network. The NAO probe focuses on troubling claims including repeated cost overruns, a secret £174 million contract award post-public funding announcements, and the absence of a finalized business case, underscoring concerns about financial irregularities. Campaigners like Tan have voiced alarm that public funds are being squandered while toll revenues disproportionately benefit private investors, especially given the LTC’s notably high cost per mile compared to projects like HS2, prompting urgent calls for transparency and accountability to safeguard taxpayer investment.