UK Government has only moderate chance of boosting infrastructure, says GlobalData

Following today’s (30 June) news that the UK plans to boost investment in infrastructure and housing;

Moustafa Ali, Economist at GlobalData, a leading data and analytics company offers his view on the government’s infrastructure spending plans:

“Including a new pledge to “Build, Build, Build”, the UK Government is banking on the high multiplier effect associated with infrastructure investment – that every pound invested generates a multiple return in terms of the wider impact on the economy. There is clear political momentum to accelerate infrastructure construction, however, the government’s fiscal position is in a dire state with government borrowing potentially reaching more than 15% of GDP in 2020. This could scupper progress in terms of funding such investment plans.

“Prime Minister Boris Johnson’s plans to increase spending for key infrastructure such as roads and railways, as well as for new homes, will provide support for a recovery in the construction industry, which has been severely impacted by the crisis. Construction output declined by 3% in Q1 2020, and preliminary data show a 40% month on month drop in April.

“The government’s infrastructure plans suggest it hopes a building boom will drive economic growth in the latter half of the year as the economy emerges from the lockdown. GlobalData is projecting a recovery in construction output in the second half of the year, but even under the most optimistic scenario, the contraction in the year as a whole will be over 10%.”

More Media