Wednesday 13 March 2019 2:50 pm | Updated: Monday 03 June 2019 12:35 am

Spring Statement: Chancellor to consult on new ways of funding infrastructure projects

The government is to launch a consultation on how the government pays for infrastructure projects such as Crossrail and HS2 in future, the chancellor said today.

In a Spring Statement overshadowed by an impending vote by MPs on whether to accept a no-deal Brexit, Philip Hammond said he would consult business on how to fund much of the country's pipeline of upcoming infrastructure projects worth more than £600m.

The consultation will be launched in order to seek views on how Britain “can best support private infrastructure investment in the context of the UK’s changing relationship with the European Investment Bank”.

Jason Millett, chief operating officer for consultancy at construction firm Mace, said: "Given the demise of PFI, finding a new way to fund Britain's infrastructure is of the utmost importance.

"It's right that the private sector should contribute, but we need to be certain that whatever the new model is, it encourages sustainable, long term growth and doesn't undermine an industry that already faces serious challenges around margins and risk management.

"In light of our imminent exit from the European Union, it is also vital to ensure that Britain is able to continue to draw on foreign direct investment from across the globe to drive our infrastructure delivery."

In October, Hammond announced he was abolishing private finance initiative (PFI) contracts, in which private sector cash is used to build infrastructure that is then leased back to the public sector, would be abolished.

The decision came after the collapse of construction giant Carillion put the controversial funding model in the spotlight.

Jonathan White, UK head of infrastructure, building and construction at KPMG, said: “Firms will welcome the chancellor’s review of how we fund Britain’s infrastructure projects, not least for the government’s commitment to being more flexible in the way they are financed.

“The UK has led the way on financing models in the past and the consultation will put the onus on businesses in the sector to help find new ways of fuelling investment in infrastructure.

"This in turn will have a real benefit for the infrastructure market and help to attract investment into the UK. Everyone benefits if the industry has more certainty about the way in which projects will be funded and structured in the future.”

Today’s announcement follows calls earlier this year for a consultation on a national infrastructure bank to replace billions of pounds of EU funding for projects after Brexit.

Currently, the UK receives funding for infrastructure projects such as Crossrail and the Thames Tideway super sewer from the European Investment Bank (EIB), but after leaving the EU this will end.

The solution could be to start a UK infrastructure bank, according to the House of Lords EU Financial Affairs Sub-Committee, which recommended the government consult on the matter in a report in January.