With the country braced for savage cuts, the Chancellor's commitment to increased capital spending came as a pleasant surprise. That will include a £30bn investment in transport projects over the next four years to provide, as Mr Osborne said, "the economic infrastructure our businesses need".
Schemes to escape the axe include the Mersey gateway bridge linking Runcorn and Widnes, the £16bn Crossrail project, and a raft of other road and rail improvements across the country. The Chancellor provided significant detail, but said a full list of projects was to follow when transport secretary Philip Hammond gives the breakdown in the national infrastructure plan next week. And despite the recent cancellation of the Building Schools for the Future programme, the Chancellor allocated £15.8bn to 600 schools in urgent need of refurbishment.
Further good news for companies making a living from working on the infrastructure is that the government has sanctioned the construction of eight new nuclear power stations. For companies like Costain () and Balfour Beatty () this will provide a steady revenue stream over a long period.
However, despite the government's commitment to see half of the new generating capacity built in the UK by 2025 to come from renewable sources, the Severn tidal power project looks dead for now, after confirmation that there will be no state funding. However, £200m was earmarked for investment in offshore wind farms.
But for the UK's infrastructure specialists, and Balfour Beatty in particular, it has to be remembered that a growing proportion of turnover is already generated outside the UK, highlighting a healthy lack of dependence on UK expenditure. And Balfour is a good example of the shift away from relying on new construction and more on maintenance of the existing infrastructure, which is a non-discretionary element. Moreover, existing framework agreements typically carry contracts with a five to 10-year lifespan, providing a significant measure of earnings visibility. Contractual obligations were partly why the overall expenditure on capital expenditure will be £2bn a year higher than previously budgeted - in other words, it's cheaper to continue than cancel.
