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Economic Case for Transformational Infrastructure

Economic Case for Transformational Infrastructure. Graham Russell AMION Consulting June 2014. Structure. Economic rationale for transformational infrastructure Measuring economic impact Case studies: forecast economic impact Liverpool 2 and the Manchester Ship Canal Ports Mersey Gateway

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Economic Case for Transformational Infrastructure

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  1. Economic Case for Transformational Infrastructure Graham Russell AMION Consulting June 2014

  2. Structure • Economic rationale for transformational infrastructure • Measuring economic impact • Case studies: forecast economic impact • Liverpool 2 and the Manchester Ship Canal Ports • Mersey Gateway • HS2 - Curzon • Bristol Arena • Realising the transformational benefits

  3. Economic rationale (1) • Infrastructure can: • Raise economic growth • Increase productive capacity • Promote agglomeration benefits • Generate significant positive spillover effects • Need for investment • Meet current demand through the renewal and upgrading of existing infrastructure • Meet future demand and create spare capacity and allow flexibility • Grow within a global economy • Address key issues including climate change and energy security UK National Infrastructure Plan Infrastructure must strengthen and drive the economy, create jobs and act as a key enabler for future economic development and rising living standards across the whole country...

  4. Economic rationale (2) World Economic Forum (2013-14) UK is ranked 28th in terms of “quality of overall infrastructure” • BUT – the UK performs relatively poorly in terms of infrastructure investment by global standards • Reasons for under-investment (or sub-optimal investment) include: • Large initial capital cost • High risk • Benefits often accrue over the long-term • Necessary but not sufficient investment • Complex interconnections and complementarities • Understanding the potential economic impacts is essential to making informed investment decisions

  5. Measuring the economic impact (1) • Economic impact assessment - impact on the local/national economy (Cost Benefit Analysis – full welfare costs and benefits) • Effects arise through inter-related mechanisms • primary: short-term and permanent employment created by the infrastructure • secondary: additional economic activity from supply linkage and income multiplier effects • tertiary: broader impact of the infrastructure in generating additional economic activity and other quantifiable benefits • wider: a range of less tangible impacts (positive or negative externalities) such as image and environmental impacts

  6. Measuring the economic impact (2) • Timing of impacts • Construction phase or activity • Operational phase or activity • Persistence • Nature of the impacts • Outputs, outcomes and impacts • Outcomes/impacts • Additional impacts • Potential benefits may include: • Employment and labour market impacts • Gross Value Added (GVA) • Students and trainees • Property market impacts • Residential units • Wider impacts

  7. Measuring the economic impact (3) • Additionality – the key concepts • Leakage • Displacement • Substitution • Multiplier effects • Deadweight

  8. Liverpool 2 and Ship Canal Ports (1) Port of Liverpool Port Wirral Port Cheshire Port Ince Port Warrington Port Salford Port Cheshire

  9. Liverpool 2 and Ship Canal Ports (2) • Liverpool 2 represents transformational change • £300 million investment • Support 3,140 gross jobs • Employment opportunities for local communities • Significant up-stream and down-stream multiplier effects • Support other opportunities – e.g. logistics satellites

  10. Liverpool 2 and Ship Canal Ports (3) • Manchester Ship Canal Shuttle and Ports will create major new sustainable growth opportunities • Combined investment of c. £560 million • Support the creation of 11,650 gross jobs • Gross Value Added impact of almost £600 million • Port Salford - UK's first tri-modal inland port facility and distribution park • Port Cheshire – potential linkages with automotive and chemical sectors within Ellesmere Port • Port Ince – enable the delivery of wider strategic plans for £850 million Ince Resource Recovery Park Port Salford Port Ince Port Warrington Port Wirral Port Cheshire

  11. Mersey Gateway • Work started on the Mersey Gateway Project on 7th May 2014 • New six lane toll bridge over the Mersey will open in Autumn 2017 • Important economic benefits: • 470 permanent full-time equivalent jobs on site during the construction phase • 4,640 permanent new jobs as a result of the operation of the Mersey Gateway, regeneration activity and inward investment • £61.9 million a year in Gross Value Added from the new jobs by 2030 • Support sustained growth of key assets including Liverpool John Lennon Airport

  12. HS2 – Curzon Masterplan • HS2 one of the largest infrastructure projects in the UK • Phase 1 will link London to Birmingham • HS2 station - focus for Curzon Masterplan • Need to ensure station is fully integrated with wider proposals for the delivery of 600,000 sq m of employment floorspace • Focus on design: • Ensure station does not act as a barrier/constraint to growth • maintain and enhance linkages between the City Centre and key growth locations • Ensure the station acts as a focus for investment • Potential to support 30,150 gross jobs • Annual net additional GVA impact of £823 million

  13. Bristol Arena • 12,000 capacity arena venue located within Temple Quarter Enterprise Zone • Mayoral investment priority • Create a major new destination adjacent to Temple Meads station • Potential to support more than 900 jobs • Significant catalytic effects • Image and perceptions • Enhanced access infrastructure • Accelerate redevelopment of major opportunities on adjacent sites – potential for a further 800 gross jobs • Opportunity to capture significant Business Rates uplift

  14. Realising the transformational benefits (1) • Comprehensive and consistent long-term vision/plan – at national, regional and sub-regional levels • Public sector appraisal/accounting – focus on net additional economic returns • Private sector investment – given limited public sector resources • Planning system – more efficient and effective • Compensation – compensating those adversely affected

  15. Realising the transformational benefits (2) • Forward planning – designing in flexibility and capacity • High quality – if sustainable benefits are to be achieved • Effective delivery – getting the right people and leadership • Integrated programme/portfolio of investments - ‘critical mass’, sequencing and linkages • Partnership working – using the know how and resources of public and private sector partners • Evidence-based – learning the lessons

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