Law
While the UK remains a member of the EU the law relating to infrastructure
has not changed. If and when the UK actually leaves the EU (something which is
at least 2 years away) parliament will have to decide which, if any, aspects of
the law relating to infrastructure development and operation it wishes to
change. Areas of focus will need to include public procurement regulations and
the funding of public sector projects.
Economic Impact
Of much greater, and immediate, concern are the economic implications for
infrastructure projects. There has already been significant speculation about
which sectors will be affected most strongly. The privatised sectors may be most
vulnerable in the short term but a downturn in the economy will also reduce the
level of public funding available.
The fall in value of the pound is another issue – on the one hand, inward
investment is better value but on the other, importing of goods and services is
more expensive. Given the heavy reliance of the UK infrastructure market on
major contractors from outside the UK, this may well create inflationary
pressures and further uncertainty in the supply chain.
Mega projects that are well advanced such as Thames Tideway Tunnel and
Crossrail are unlikely to be affected. Those further down the pipeline such as
HS2 and Heathrow's third runway are more vulnerable to the less certain economic
outlook and a hiatus while the new government gets to grips with the
implications of Brexit and key departmental resources are reallocated to deal
with EU exit negotiations. Initial indications are that in the medium to long
term the need for infrastructure investment will be greater than ever (not least
as an economic stimulus and to show the UK remains an attractive investment
option) therefore the longer term impact could be neutral or even positive.
A related issue will be the availability of funding. The European Investment
Bank (EIB) has recently been a major investor in UK infrastructure. On exit from
the EU the UK will have to relinquish its status as shareholder in the EIB and
take its chances as a non-member state recipient of funding. Only time will tell
as to how this relationship will progress but there have already been some
immediate casualties as a result of the uncertainty around EIB and European
grant funding.
Conclusions
The biggest impact of Brexit on infrastructure is likely to be delay to
investment decisions, with some projects ultimately being postponed indefinitely
or scaled down significantly. The legal landscape in which projects do proceed
will largely depend on the terms of the deal the new government is able to cut
with the EU and individual member states going forward. There may also be early
implications for the UK’s relationship with non-member states. There are some
positive early signs in this area - the challenge will be making the most of
these in the face of all the other challenges facing government.