Spiralling building costs are wrecking Britain's prospects

Telegraph

12 hours ago

It will provide the water for tens of thousands of homes, allow supply to catch up with a huge rise in the population, and it might even allow resource-hungry data centres to finally get built in the South East of England where they are most needed. There are lots of reasons to welcome the planned new Abingdon Reservoir in Oxfordshire. There is just one catch. The cost has tripled from the initial estimates, and will now come in at £7.5bn.
In reality, from nuclear power stations, to rail lines, to runways, this is happening time and time again. Everything costs far more to build in Britain than it does in comparable countries. And until we work out how to fix that, there is no hope of the economy ever recovering.
When, or rather if, it is finally opened in 2040, the Abingdon reservoir will be the first major new piece of water infrastructure the UK has built in more than 30 years. Even though we have added 11m people to the total population since 1995, and total output has almost doubled, at least in nominal terms, we have been squeezing every last drop of water out of a largely Victorian water system.
The locals may not like it, but we desperately need some new reservoirs, and Abingdon is as good a place as any to start. The problem is the cost. From initial estimates of around £2bn, Thames Water said this week the bill was likely to rise to £7.5bn, and perhaps even more.
We can add it to the list of escalating infrastructure costs. Last month, Ed Miliband, the Energy Secretary, in a rare example of a sensible decision, gave the go-ahead for the Sizewell C nuclear power station.
Again, however, the price was shocking. It will come in at £38bn, almost double the £20bn that was estimated when it was first discussed five years ago. If anyone believes that will be the final figure, if I have a pre-loved windmill I would like to sell them.
The estimated cost of a third runaway at Heathrow has risen from £14bn to close on £50bn; the cost of the HS2 rail link has already gone up to close on £100bn, and that is after we have halved its length; the cost of the Lower Thames Crossing connecting London and Kent has risen to £10bn, and work hasn't even started yet. The list goes on and on. It makes no difference whether a project is large or small.
In my corner of south-west London, Hammersmith Bridge has been closed for years, clogging up traffic for miles, but now that the cost of fixing it has doubled to £250m, the money is not available to start work.
Our rivals are far better at keeping costs under control. France is not a cheap country to do business in, but nuclear plants cost less than £10bn each. According to Britain Remade, nuclear power plants cost an estimated £9.4bn per megawatt in the UK compared with £4.4bn in France and £2.2bn in South Korea.
Reservoirs are hard to compare precisely because the size and the value of the land varies so much. But the huge new Bassin d'Austerlitz built to clean up the Seine for the Paris Olympics cost only €1.4bn (£1.2bn), far less than Abingdon. As for high-speed rail lines, everyone else builds them for a fraction of the cost in the UK.
The trouble is, the soaring cost of building anything is turning into a catastrophe for the economy. There are three big problems. First, hardly any new infrastructure projects get started because the costs are so horrendous. Thames Water was already in dire financial trouble, and adding billions to the cost of new reservoirs is not going to help fix that. Meanwhile, the Government is already so deeply in debt and so strapped for cash, it can't afford to fund them either.
Next, the huge bills and the endless escalation of prices deter investors. After all, why bother with infrastructure investments in the UK when you can build the same kit somewhere else for half the price, and earn far better profits?
Finally, it means the prices that have to be charged soar out of control. Energy from Sizewell C will cost a lot more than it would have done if it had been built more efficiently. Presumably, anyone planning to travel on HS2, if it ever gets finished, will have to take out a second mortgage to pay for the cost of the ticket to Birmingham. Expensive infrastructure pushes up the price of everything else.
The Labour Government was meant to be cutting the costs of building projects. But so far it has failed dismally. We can see that from the way estimates for projects such as Abingdon and Sizewell C keep going up when they should be coming down.
We could fix the crisis if the political will were there. Like how? The UK needs to streamline its planning rules so that a single minister could give the green light for a project, without local consultation, without endless reports, and most of all, without any right to judicial review.
Likewise, we need to scrap the environmental rules that prioritise wildlife over people and the economy. And we need to train more engineers and skilled construction workers so the labour is available once a project is approved and the finance has been secured.
The cost of building anything in Britain is an issue that has been growing for years, but it is now reaching crisis proportions. In the 19th century, Britain was a world leader in creating infrastructure. Until we can build again, at reasonable cost, there is no hope of the economy recovering – and eventually the water, and the power, will just run out.