Britain’s failure to press ahead with large-scale infrastructure projects is puzzling. The government is keen, funding can only be described as ultra-cheap and there is a long list of projects waiting on the runway – not least extra airport capacity in the south-east.
The Airports Commission, headed by Sir Howard Davies, will deliver its verdict this week on expanding Gatwick or Heathrow, while reserving judgment on a winner until after the election. The dither and delay surrounding the decision appears to be symptomatic of a more general malaise.
One factor getting in the way is the UK’s huge stock of wealth. Building an airport extension, new railway or road means knocking down expensive homes or tracking across beautiful (and expensive) countryside. Never have our homes and fields meant so much in cash terms. To dig them up does not just mean losing a lovely vista, but also taking a hit on a substantial investment.
The high-speed rail link from London to Birmingham could be ready by 2026, according to its supporters. That seems unlikely when there are disputes up and down the route long before the start of work in 2017. Solihull, the location of some of the West Midlands’s most expensive streets, recently joined the list of objectors after it noticed that a train depot was to be sited on its doorstep.
Further south, the fight is equally dirty. The people of Oxfordshire and the Chilterns have stepped up demands for compensation and longer tunnels.
Inside Whitehall, rail transport is considered one of the most important elements of infrastructure. London’s £15bn Crossrail project kept going despite the financial crisis and subsequent recession. More than £9bn was spent on an upgrade of the west coast main line. A £7.5bn upgrade of the Great Western route is ongoing. Transport for London remains one of the best funded public sector organisations in the country.
One reason train lines are popular is the quantifiable payback. Passengers will travel on newer trains in increasing numbers and tolerate higher fares. Another is the political ease of tunnelling and upgrading, as opposed to building new overground routes.
Roads have proved trickier. For a start, where’s the payback? The CBI, which is lobbying for a new road under Stonehenge on the A303, has toyed with tolls. But there is an inbuilt resistance to paying for an upgraded road when the old one was free.
Business lobby groups now favour an independent infrastructure body to clear the path for new roads and rail, energy upgrades and super-fast digital. Such a body, free of political interference, could deliver a national infrastructure plan, they argue.
Yet this plan, like the idea of bribing homeowners and businesses to favour development, bows to Britain’s laissez-faire economy and its constant drift to the south and east. Infrastructure follows people and that means most schemes are earmarked for London and the south-east (see Crossrail 2, a north-south route linking Wimbledon and Alexandra Palace).
Rather than spending billions of pounds widening the arteries of the south-east’s economy, we should switch the funding northwards. Rather than treating as an afterthought plans to link Leeds, Manchester, Liverpool and Sheffield, they should be centre stage. With the population growing, housing, new schools, sewers and power stations will be easier and cheaper to build in the north.
Only when we improve the infrastructure support around the conurbations of the north-east and west will jobs and people follow. If jobseekers can be directed north, much of London’s infrastructure will last another few decades without any extra expense. Boris Johnson will never agree, but his cycle highways in the sky and underground ring roads are all designed to cope with London attracting millions more people. What if they headed up the M1 to a new life?
Standard needs Sands to be strong
Had Peter Sands left Standard Chartered a year ago, he would have departed as a minor banking hero. True, there was the horrible blemish of a £415m fine from a New York regulator for hiding transactions with Iran, but the eight-year tally was excellent. Standard breezed through the industry’s 2007-09 crisis, and not only because of its concentration in emerging markets. It seemed to have the right stuff – a conservative culture and a firm grasp of risk.
Now Sands finds himself fighting to stay as chief executive. The shares have almost halved since their 2013 high and trade slightly below book value, a humiliating comedown. This week’s three-day presentation to investors in Hong Kong is a make-or-break moment. Fluff it and fund managers’ grumbles of discontent may turn to open calls for boardroom change.
Sands must convince on two fronts. The first is basic: are bad loans under control? The scary figure in last month’s third-quarter update was the surge in impairments to $539m (£340m), up $250m on a year ago. “We remain watchful in India, in China and of commodity exposures more broadly,” said the bank. Too vague. Shareholders want a detailed appraisal of loans to big Asian companies.
Then there’s capital. In theory, it’s not a problem. Standard has the second highest capital ratio among major UK banks. But it used to have the highest, and the City worries about a dividend cut or rights issue to kickstart growth. Sands plans to removecut $400m of costs. But is that enough at an organisation even the chairman admits is bureaucratic?
That admission came in a leak of remarks Sir John Peace made to 300 senior managers in Singapore. The leak points to other worries. Has Standard lost its sense of unity? Do Sands’s own lieutenants think he is yesterday’s man? Did January’s reshuffle, which saw the exit of finance director Richard Meddings, upset the bank’s mojo?
There is no obvious internal successor. But Standard, in its current state, cannot afford to have a chief executive who looks like a dead man walking. Sands must impress in Hong Kong. The alternative is a crisis of confidence.
Difficult price point for Coupe
Hold on to your hats. This week Sainsbury’s boss Mike Coupe will set out how he intends to tackle the “perfect storm” of problems he has warned is sweeping through the supermarket sector.
No longer are punters piling their trolleys high in big stores. Instead they are popping fewer items into their baskets, shopping more often and looking for cheaper deals.
Coupe promised last month he would “leave no stone unturned”. It is a tricky challenge: Coupe is not really the new boy, even though he only took charge in July. He was the key lieutenant of former boss Justin King and, unlike his rival at embattled Tesco, he cannot pin blame on his predecessors. But he cannot afford to cling to the past. Sainsbury’s has never enjoyed competing hard on price. The City is waiting to find out how far Coupe is prepared to slash prices to keep customers.
