This week chancellor Rachel Reeves launched yet another grand plan for economic growth, with a wedge of planning and infrastructure pledges, but will it make any difference? Tim Clark reports
Another week, another trip to the lectern for a major UK politician.
Taking over from prime minister Keir Starmer this week was chancellor Rachel Reeves who outlined her infrastructure-led vision for economic growth, promising to “go further and faster” in supporting key projects.
In a move welcomed by business groups such as the Confederation of British Industry (CBI) the chancellor pledged to streamline the planning system, unlock major infrastructure investments, and reaffirmed government backing for the long-debated third runway at Heathrow.
“I have been genuinely shocked about how slow our planning system is,” Reeves said in her speech in Oxfordshire at a Siemens’ facility. “By how long it takes to get things done.”
The speech, however, raised now familiar questions over Labour’s economic plan, and how the government is going to be able to solve the riddle of “going for growth” with environmental concerns, the political will to enact real change, and whether these reforms can avoid the inertia that has plagued successive governments.
Bat tunnel
Reeves’ declaration that she was “genuinely shocked” by the sluggish pace of the UK’s planning system will resonate with developers and investors alike. The chancellor pointed to the now-infamous £100m HS2 “bat tunnel” as an example of regulatory obstacles stifling progress.
Her solution? Developers will contribute to a pooled “nature fund” rather than be hindered by species-specific environmental requirements.
Kathryn Jump, co-head of planning at Shoosmiths says that the chancellor’s approach may have potential, but will need to be carefully managed
“Pooling environmental contributions could offer more ‘bang for the buck’ when it comes to nature conservation and recovery – particularly if the spend is aligned to Local Nature Recovery Strategies ,which are due to be introduced across England this year,” she says.
“The idea of increasing density of development around transport hubs makes sense as these are more likely to be sustainable locations. It will be interesting to see how the pilot progresses at Castleton.”
Jump’s comments underscore a key challenge. As Build in Digital wrote this week, changes to how legal challenges are approached aim to speed up decisions, however challenges will come from environmental groups and the plan outlined by the government would only help kick out those that have no realistic grounds of success.
Third way
Arguably, the most controversial element of Reeves’ announcement was her unequivocal support for a third runway at Heathrow. The expansion has been on and off the table for over two decades, mired in political hesitancy, legal battles, and environmental opposition.
“The perception that the planning system is a failing system and a blocker to economic growth is a long standing one, and successive governments have treated planning reform as a key objective.” says Christian Silk, planning partner at Osborne Clarke.
The Heathrow saga is a cautionary tale of how infrastructure mega-projects in the UK can languish in bureaucratic purgatory. The last Labour government initially backed the expansion, only for the Conservative-led coalition to scrap it in 2010.
The former Mayor of London, Boris Johnson (remember him?) spent a number of years campaigning for a new airport in the Thames, an airports commission was established to look for recommendations – and saw those recommendations ignored. The Heathrow runway scheme was revived in 2018, only to be challenged in the courts and effectively stalled again.
History may repeat itself in the coming decade, however it will be a surprise if the new runway project is approved quickly.
“”Political instability can so often derail projects, but to get this backing on Heathrow, Lower Thames Crossing (LTC) and East West Rail (EWR) – projects we have been very close to – within six months of a new government gives them the best possible chance of being delivered,” says Jon Stott, group managing director of Ardent.
“LTC should have spades in the ground this year, whilst EWR Phase 3 should be consented during this Parliament, whilst it’s likely that the Heathrow proposals will be sufficiently far advanced, and the application in or through examination by the time of the next election, that it feels this time around we will finally have lift-off, and a major boost for the UK economy.”
The chancellor’s announcement made it clear that the government sees the private sector as a key partner in delivering major infrastructure.
The Lower Thames Crossing, a project to alleviate congestion in the South East, the chancellor has promised will be privately financed. Similarly, the government hopes that new “Innovation Hubs” in Cambridge will supercharge the UK’s tech sector.
Alex Kirkhope, commercial partner at Shoosmiths, welcomes the sentiment but warns that details matter.
“Any commitment to support the UK tech sector in driving innovation and investment is to be welcomed. As ever, the devil will be in the detail,” he says. “With previous announcements already having been made regarding regionally focused initiatives, like the AI Growth Zones forming part of the government’s recent AI Opportunities Plan, companies will ultimately want to understand what funding or other benefits will sit behind these hubs.”
The Oxford-Cambridge Arc, like Heathrow, is another scheme that has seemingly come back from the dead. Economically, it makes sense, and build’s on the quietly impressive East-West rail project. Again, delivery is key.
Pension potential?
One of the more intriguing elements of Reeves’ announcement was the proposal to ease restrictions on pension scheme investments to help fund economic growth. The idea is that surplus pension funds could be channelled into UK infrastructure and business investment.
“Exactly how the government proposes to ease restrictions is not clear. Still less clear is how the government proposes to direct returned surplus funds into the UK economy,” says Paul Carney, disputes and pensions partner at Shoosmiths.
“We are very conscious of the fact that pension scheme surpluses were rare until quite recently. In our experience, an investor will agree to invest in a certain way only if the body requiring the investment to be made is prepared to underwrite the risk of the investment being a bad one.”
This highlights a fundamental concern: Pension fund managers have a fiduciary duty to maximise returns for their members, not to act as de facto venture capitalists for the government. Without clear protections, this proposal could face significant pushback from the financial sector.
With a headline that effectively stated “ditch the bats and newts” Reeves’ said that the UK does not need to choose between economic growth and environmental goals. She stated that net zero is the “industrial opportunity of the 21st century” and that offshore wind projects will be fast-tracked, particularly in East Anglia.
Meaningful change
However, some industry figures remain wary. James Cogan, director at Boyer, notes that while infrastructure spending is welcome, it will only be effective if planning reform is meaningful.
“While the government has thrown its weight behind the delivery of key infrastructure projects, and intends to use new powers in the Planning and Infrastructure Bill to speed up delivery, the risk remains that new homes, offices, and factories will continue to be held up by local opposition and overstretched planning authorities.”
The reality is that successive governments have talked a big game on planning reform, yet local opposition remains a formidable obstacle. The shift to a “default yes” on development around train stations, for example, could be legally and politically fraught.
Labour’s new approach to planning and infrastructure is ambitious, but it is not without precedent. The Conservative government also sought to speed up the planning system, with mixed results. Even when well-intentioned, planning reform is a bureaucratic minefield.
“None [of these reforms] seem to have overcome the inertia inherent in the system without risking moving away from localism towards centralised top-down decision making, which can be politically unpopular,” Osborne Clarke’s Silk adds.
Silk points out that the consultation document “Planning Reform Working Paper: Streamlining Infrastructure Planning” published on 26 January proposes changes to the review of National Policy Statements and the Nationally Significant Infrastructure Planning Regime, but are they really a game changer?
“The proposals made in this working paper are all sensible and reflect criticisms by those involved in the consenting process,” he adds. “But they are not radical changes that would likely lead to an unlocking of the 150 Nationally Significant Infrastructure Projects that the government wants to see come forward over the next five years.”
Ultimately, the key question is whether this government can break the cycle of grand infrastructure promises followed by legal battles, delays, and political backtracking.
If it can, Reeves’ speech may indeed mark a turning point. If not, it will become just another chapter in a long history of unfulfilled infrastructure ambitions.
Main image: Chancellor Rachel Reeves delivers an economic growth speech at Siemens Healthineers in Oxford. Courtesy of HM Treasury. Picture by Kirsty O’Connor/Treasury
Read next: Voltalis sets out £1bn investment plan for UK energy market
Are you a building professional? Sign up for a FREE MEMBERSHIP to upload news stories, post job vacancies, and connect with colleagues on our secure social feed.
