Andrew Webb: Why keeping the cranes up starts in the gutter
Despite plans to increase spending on infrastructure, Andrew Webb argues that lack of reliable water and sewerage services may stop Belfast regeneration projects from ever getting off the ground
During the recent austerity years there were calls from some that it would be wiser to borrow more money and invest it on capital infrastructure projects. The rationale being that interest rates on borrowing are at historically low levels and that the return on investment from infrastructure is far-reaching into the wider economy. The current Chancellor recognises the merits of an infrastructure revolution and announced plans for the "biggest increase in infrastructure that this country has ever seen" at the Conservative conference. While this statement of intent requires the usual caveats around how "time will tell", the ambition recognises that roads, public transport, broadband, energy, utilities infrastructure etc. are the backbone of our economy.
Although there is no shortage of examples of infrastructure projects overrunning on their budget and over-estimating their benefits (the HS2 rail project being a current example), the case for good infrastructure is clear from two perspectives.
Firstly, when an economy is slowing or in recession and consumers have retrenched, Government spending on infrastructure acts as a shot in the arm that boosts construction employment and ripples positively across the economy, through the supply chain and through the spending of wages on goods and services. Secondly, infrastructure enhances the productive capacity of the economy - the Toome Bypass, the A5 road scheme and 5G mobile technology will all serve to make us more productive, or at least give us the means to be more productive.
Economic arguments aside, sometimes we reach a point where investment is inescapable and we just need to spend money maintaining or improving essential items. None of us weighs up the pros and cons of replacing worn-out tyres on a car - we find a way to make the investment and change the tyres or stop driving. It feels like that is where we are with our water infrastructure. For some time now any work on economic development strategies for councils has inevitably entailed a conversation about the constraints on growth presented by a water, sewage and electricity infrastructure that is at or nearing full capacity. NI Water have now come out very vocally in their draft strategy to articulate the extent of the issue.
NI Water note that over the past 15 years the capital budget made available for investment in sewerage services has not been able to keep pace with the investment required to provide increased capacity to facilitate growth. As a result, many of our sewerage networks and treatment plants are operating at or beyond their design capacity, limiting opportunities for new connections and constraining economic development.
Is this scaremongering on the part of NI Water? I suggest not, as we already have real examples of how this issue can impact. Remember the story from last year when it emerged that new house building has been banned in Saintfield after its sewage system reached capacity? A doubling of Saintfield's population over two decades has been too much for the sewage system to handle without the required investment in upgrades being made.
Underfunding of NI Water during the period 2015-2021 to the tune of just over £700m has led to this. The investment required in the system was calculated to be £1.7bn. The actual level of investment made was £990m. While these are not inconsiderable numbers, they obviously fall well short of what is needed and are now having a direct impact. NI Water suggest that there are curbs to economic development with new housing and businesses unable to get connected to the sewerage system in around 70 towns here.
Please log in or register with belfasttelegraph.co.uk for free access to this article.
Looking forward, the demand for investment in the water system is getting larger, partly as a symptom of the under-investment up to now, but largely due to ambitious growth plans that will place additional demands on the network. When former US President Clinton visited here during the 20th anniversary of the 1998 Good Friday/Belfast Agreement he urged us to "keep the cranes up". This call to action tapped into a momentum that has developed across Belfast over recent years that has seen some major developments. New hotels, office blocks and student accommodation rising across the city.
At the time of the last crane survey, there were 35 schemes under construction and 21 were completed in 2018. Recently, landmark developments have gained prominence at the old Sirocco Works and the Tribeca area.
Further, the Belfast Agenda notes the City Council's aims to have 66,000 more people living here by 2035 and the ambitious game-changing City Deal is predicated on significant capital expenditure, all of which puts additional stress on the water and sewerage network.
Could a once in a generation economic stimulus, as the City Deal has been dubbed, be curtailed by a lack of water and sewerage? The latest estimates from NI Water suggest that the investment required between 2021 and 2027 will be £2.5bn. In Belfast alone a £1bn investment is required or economic growth could stall.
Efforts to rebalance the economy, increase tourism, attract foreign direct investment and grow and diversify the export base all require reliable water and sewerage services. We might be reaching a point where keeping the cranes up requires some serious investment in drains. Under the current funding model, doing that will require tough choices to be made with regards to where public money is allocated. Perhaps the Chancellor's planned infrastructure revolution, or any future Government's plans, will provide a significant boost for capital spending. There are other ways that NI Water could attract funding (ie borrowing), but that would require a change in how it is funded and paid for.
Andrew Webb is chief economist at Grant Thornton