As the Chancellor gears up to deliver the Autumn Budget next week, let’s look behind the headlines at the reality of what is going on with the UK’s economy and lack of growth. Despite what the current government argues (not very different from the previous incumbents), the UK’s economic stagnation is not so much due to a lack of new infrastructure projects or excessive regulation, but rather the chronic failure to maintain existing assets. Essential networks—such as railways, roads, water systems, and mobile connectivity—are in poor condition, creating inefficiencies and costs that ripple through the economy. Instead of prioritising glamorous projects like HS2, the focus should be on ensuring that current systems actually work. Well-maintained infrastructure provides resilience and reduces the disproportionate costs of failures, making it a cornerstone for productivity and growth. This is not a technical challenge but a matter of political priorities and regulatory focus.
Current fiscal rules and political incentives distort spending decisions. The government re-labels maintenance as “investment” to justify borrowing, shifting costs to future generations and encouraging flashy enhancements over essential upkeep. True maintenance should be funded on a pay-as-you-go basis through current bills, ensuring intergenerational fairness and system reliability. Capital maintenance comes first, second, and third, with new projects only after existing infrastructure is robust.
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As the Chancellor gears up to deliver the Autumn Budget next week, let’s look behind the headlines at the reality of what is going on with the UK’s economy and lack of growth. Despite what the current government argues (not very different from the previous incumbents), the UK’s economic stagnation is not so much due to a lack of new infrastructure projects or excessive regulation, but rather the chronic failure to maintain existing assets. Essential networks—such as railways, roads, water systems, and mobile connectivity—are in poor condition, creating inefficiencies and costs that ripple through the economy. Instead of prioritising glamorous projects like HS2, the focus should be on ensuring that current systems actually work. Well-maintained infrastructure provides resilience and reduces the disproportionate costs of failures, making it a cornerstone for productivity and growth. This is not a technical challenge but a matter of political priorities and regulatory focus.
Current fiscal rules and political incentives distort spending decisions. The government re-labels maintenance as “investment” to justify borrowing, shifting costs to future generations and encouraging flashy enhancements over essential upkeep. True maintenance should be funded on a pay-as-you-go basis through current bills, ensuring intergenerational fairness and system reliability. Capital maintenance comes first, second, and third, with new projects only after existing infrastructure is robust.
‘Easy money’ (quantitative easing and low nominal/negative real interest rates) has left a legacy of lots of zombie companies that should not still be in business, because they are not genuinely profitable. Cheap debt washed through the banking system keeps them afloat.
For the utilities, easy money has had a devastating impact, encouraging widespread financial engineering. Thames Water is the extreme example, but there are many others among the unlisted, privately owned, UK utilities. The result is a set of companies that are highly vulnerable to economic shocks being kept on life systems.
The impact is most obvious in the boardroom, where the focus is on servicing the debt, rather than on customers, future investment and R&D. As these are the elements that drive productivity growth, the long-term economic growth opportunities are seriously impaired.
Facing up to the consequences of zombie companies in the utilities sector means Special Administration, pulling the plug on the zombies, restructuring them, and selling them on to new owners. The debt holders will have to take a haircut. But what’s not to like about more productivity, more investment, better customer service, boards focused on their customers and the business? This has to be done now if we’re serious about turning around not only the utilities sector but the wider British economy. Instead of endlessly kicking the Thames Water can down the road, Ofwat should call in the Special Administrator now. The costs of not doing so are serious.
Helm Talks - energy climate infrastructure & more
As the Chancellor gears up to deliver the Autumn Budget next week, let’s look behind the headlines at the reality of what is going on with the UK’s economy and lack of growth. Despite what the current government argues (not very different from the previous incumbents), the UK’s economic stagnation is not so much due to a lack of new infrastructure projects or excessive regulation, but rather the chronic failure to maintain existing assets. Essential networks—such as railways, roads, water systems, and mobile connectivity—are in poor condition, creating inefficiencies and costs that ripple through the economy. Instead of prioritising glamorous projects like HS2, the focus should be on ensuring that current systems actually work. Well-maintained infrastructure provides resilience and reduces the disproportionate costs of failures, making it a cornerstone for productivity and growth. This is not a technical challenge but a matter of political priorities and regulatory focus.
Current fiscal rules and political incentives distort spending decisions. The government re-labels maintenance as “investment” to justify borrowing, shifting costs to future generations and encouraging flashy enhancements over essential upkeep. True maintenance should be funded on a pay-as-you-go basis through current bills, ensuring intergenerational fairness and system reliability. Capital maintenance comes first, second, and third, with new projects only after existing infrastructure is robust.
