SUMMARY OF REPORT CONTENTS

       2010 Spending Review - Transport Financial Settlement

                 - Resource and Capital: 2010-2015 (£billion).

This 3rd edition of our report specifically reviews the Transport Infrastructure Construction Market, with a particular focus on the impact of the economic downturn on sector output, the recent financial settlement for the transport sector outlined in the 2010 CSR and forecasts for contractor’s output to 2014. The report evaluates the major sectors of rail, roads, airports and ports and also assesses the major national and regional transport project pipeline, with schemes currently under construction and those expected to complete beyond 2020.

Over the past decade, the government has delivered over £150bn investment in transport sector as a whole and over £12.8bn billion alone will be invested by the new Coalition government in 2010-11. The 2010 Comprehensive Spending Review (CSR) brings to an end higher spending levels on transport seen under Labour, when the total DfT budget rose by over 11% between 2008-09 and 2009-10 to reach a peak of £14.9bn.

For contractors in the transport sector, the 2010 Spending Review brought mixed news. The Department for Transport’s 15% budget reduction over the next four years is lower than the 19% Government average and the Department’s reduction in capital funding (11%) is far better than the 29% average.

Roads are still expected to be the dominant sector, accounting for around 31% of total infrastructure construction output in 2009. The Highways Agency’s trunk roads budget will be heavily cut with capital spending on England’s trunk roads almost halving in the next three years, from £1.6bn this year to just £877m in 2013-14 (in cash terms). There was confirmation of eight major road schemes including improvements to the A11, M1 M4 and M5, which was further boosted on 26th October 2010 by the announcement that an additional 16 roads and public transport schemes would go ahead as a result of the Department for Transport’s spending review settlement. In addition, the Transport Secretary announced a pot of over £600m of funding for local authority road projects, for which local authorities will be invited to bid over the next few months.

In the rail sector spending was largely protected in the 2010 CSR and an injection of around £34bn between 2009 and 2014 is expected to deliver a number of major new and enhanced schemes including Crossrail, the Mersey Gateway Crossing project, the Thameslink project, the East Coast Mainline and station enhancements at Birmingham New Street, London King’s Cross, Reading and Gatwick Airport stations. The CSR also confirmed the investment of £750m in getting High Speed Rail up and running over the next four years.

Although overall the Comprehensive Spending Review may not have been as severe as first feared, the industry has suffered some significant cuts, with the cancellation of a number of major infrastructure projects now confirmed. The Highways Agency’s trunk roads budget will be heavily cutback and local authority capital funding will also suffer cuts with many local authorities finding out in the New Year whether their major transport schemes are unaffordable.