1. Economic Case for Transformational Infrastructure Graham Russell AMION Consulting June 2014 1

2. Structure Economic rationale for transformational infrastructure Measuring economic impact Case studies: forecast economic impact o Liverpool 2 and the Manchester Ship Canal Ports o Mersey Gateway o HS2 - Curzon o Bristol Arena Realising the transformational benefits 2

3. Economic rationale (1) Infrastructure can: o Raise economic growth o Increase productive capacity o Promote agglomeration benefits o Generate significant positive spillover effects Need for investment o Meet current demand through the renewal and upgrading of existing infrastructure o Meet future demand and create spare capacity and allow flexibility o Grow within a global economy o Address key issues including climate change and energy security 3 UK National Infrastructure Plan Infrastructure must strengthen and drive the economy, create jobs and act as a key enabler for future economic development and rising living standards across the whole country...

4. Economic rationale (2) BUT – the UK performs relatively poorly in terms of infrastructure investment by global standards 4 World Economic Forum (2013-14) UK is ranked 28 th in terms of “quality of overall infrastructure” Reasons for under-investment (or sub-optimal investment) include: o Large initial capital cost o High risk o Benefits often accrue over the long-term o Necessary but not sufficient investment o Complex interconnections and complementarities Understanding the potential economic impacts is essential to making informed investment decisions

5. Measuring the economic impact (1) Economic impact assessment - impact on the local/national economy (Cost Benefit Analysis – full welfare costs and benefits) Effects arise through inter-related mechanisms 5 o primary: short-term and permanent employment created by the infrastructure o secondary: additional economic activity from supply linkage and income multiplier effects o tertiary: broader impact of the infrastructure in generating additional economic activity and other quantifiable benefits o wider:a range of less tangible impacts (positive or negative externalities) such as image and environmental impacts

6. Measuring the economic impact (2) Timing of impacts o Construction phase or activity o Operational phase or activity o Persistence Nature of the impacts o Outputs, outcomes and impacts o Outcomes/impacts Additional impacts 6 Potential benefits may include: Employment and labour market impacts Gross Value Added (GVA) Students and trainees Property market impacts Residential units Wider impacts

7. Measuring the economic impact (3) Additionality – the key concepts o Leakage o Displacement o Substitution o Multiplier effects o Deadweight 7

8. Liverpool 2 and Ship Canal Ports (1) 8 Port Wirral Port Cheshire Port IncePort Warrington Port Salford Port of Liverpool

9. Liverpool 2 and Ship Canal Ports (2) Liverpool 2 represents transformational change o £300 million investment o Support 3,140 gross jobs o Employment opportunities for local communities o Significant up-stream and down-stream multiplier effects o Support other opportunities – e.g. logistics satellites 9

10. Liverpool 2 and Ship Canal Ports (3) Manchester Ship Canal Shuttle and Ports will create major new sustainable growth opportunities o Combined investment of c. £560 million o Support the creation of 11,650 gross jobs o Gross Value Added impact of almost £600 million o Port Salford - UK's first tri-modal inland port facility and distribution park o Port Cheshire – potential linkages with automotive and chemical sectors within Ellesmere Port o Port Ince – enable the delivery of wider strategic plans for £850 million Ince Resource Recovery Park 10 Port WirralPort Cheshire Port IncePort Warrington Port Salford

11. Mersey Gateway Work started on the Mersey Gateway Project on 7 th May 2014 New six lane toll bridge over the Mersey will open in Autumn 2017 Important economic benefits: o 470 permanent full-time equivalent jobs on site during the construction phase o 4,640 permanent new jobs as a result of the operation of the Mersey Gateway, regeneration activity and inward investment o £61.9 million a year in Gross Value Added from the new jobs by 2030 o Support sustained growth of key assets including Liverpool John Lennon Airport 11

12. HS2 – Curzon Masterplan HS2 one of the largest infrastructure projects in the UK Phase 1 will link London to Birmingham HS2 station - focus for Curzon Masterplan Need to ensure station is fully integrated with wider proposals for the delivery of 600,000 sq m of employment floorspace Focus on design: o Ensure station does not act as a barrier/constraint to growth o maintain and enhance linkages between the City Centre and key growth locations o Ensure the station acts as a focus for investment Potential to support 30,150 gross jobs Annual net additional GVA impact of £823 million 12

13. Bristol Arena 12,000 capacity arena venue located within Temple Quarter Enterprise Zone Mayoral investment priority Create a major new destination adjacent to Temple Meads station Potential to support more than 900 jobs Significant catalytic effects o Image and perceptions o Enhanced access infrastructure o Accelerate redevelopment of major opportunities on adjacent sites – potential for a further 800 gross jobs Opportunity to capture significant Business Rates uplift 13

14. Realising the transformational benefits (1) Comprehensive and consistent long-term vision/plan – at national, regional and sub-regional levels Public sector appraisal/accounting – focus on net additional economic returns Private sector investment – given limited public sector resources Planning system – more efficient and effective Compensation – compensating those adversely affected 14

15. Realising the transformational benefits (2) Forward planning – designing in flexibility and capacity High quality – if sustainable benefits are to be achieved Effective delivery – getting the right people and leadership Integrated programme/portfolio of investments - ‘critical mass’, sequencing and linkages Partnership working – using the know how and resources of public and private sector partners Evidence-based – learning the lessons 15