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‘Brexit’ Leaves UK Projects in Limbo

Tuesday, June 28, 2016

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Last week’s British vote to leave the European Union had immediate fallout in the markets, but it may also have longer-term effects on infrastructure investment in the U.K.

While there’s no set plan for how a British exit from the EU might take shape, one thing that’s likely certain is that the U.K. will have to withdraw from its involvement with the European Investment Bank (EIB), an EU-associated bank that has invested heavily in big British infrastructure projects.

Heathrow Airport
Mike Pennington, CC BY-SA 2.0, via Wikimedia Commons

One major project that faces uncertainty is a proposed third runway project at Heathrow, Europe’s busiest airport.

In addition, some specific projects, notably an expansion of London’s Heathrow Airport, could face a veto from the government that takes power in the wake of Prime Minister David Cameron’s resignation.

EU Investment

The nonprofit EIB, established in the 1950s as part of the leadup to the EU, lends out billions of euros each year for projects involving infrastructure, environmental, innovation and small-business matters. In 2015, it lent a record 7.8 billion euros (more than $8.5 billion) to U.K. projects.

The EIB has invested 1.5 billion pounds in Crossrail, a major rail project in England, and has lent millions annually for updates to energy and water infrastructure in the U.K.

Last week, prior to the “Brexit” vote, attorneys Robin Baille, Stefanie Atchison and Lydia Taylor argued that the decision to leave the EU, and therefore give up its role in the EIB, would likely result in cuts to EIB spending in the U.K., and an expanding infrastructure spending gap.

Crossrail construction
By Marcus Rowland, CC BY-SA 4.0, via Wikimedia Commons

The EIB has invested 1.5 billion pounds in Crossrail, a major rail project in England.

“The impact of decreased EIB lending would inevitably be felt most keenly on the larger infrastructure projects such as Crossrail or London Underground upgrades, where EIB's involvement is undoubtedly beneficial,” the attorneys wrote on Lexology.

Moreover, they added, “Given the current lack of U.K. government investment in infrastructure, particularly social infrastructure, it is hard to see HM Treasury stepping into the breach in the short to medium term.”

Jonathan Taylor, EIB vice president, told an audience in Northern Ireland prior to the vote that EIB’s investment in non-EU nations is “only a fraction of that invested in member nations,” according to the Belfast Telegraph.

Heathrow's Third Runway

One major project that faces uncertainty with or without the EIB is a proposed third runway project at Heathrow, Europe’s busiest airport. The runway construction was recommended last year, but has become a political football since; former London mayor Boris Johnson, a “Leave” campaigner and possible candidate for prime minister upon Cameron’s resignation, is critical of it.

Assessments of the status of the runway project post-Brexit vote range from “up in the air” to “dead in the water,” according to players in the discussion.

The third runway would come at a cost of 18.6 billion pounds (about $24.5 billion), according to media reports.

In lieu of the Heathrow project, though, another airport expansion could take place: Representatives of Gatwick airport, north of London, reportedly believe that airport could get a boost instead of Heathrow.

The Financial Times reports that, in addition to the Heathrow expansion, other projects could be reconsidered by a new government, including a new nuclear plant and the High Speed 2 rail line, known as HS2.

Civil Engineers Group Comments

For now, uncertainty is the rule, and those who work directly with infrastructure projects in the U.K. are generally calling for the government to assure that major projects aren’t lost during this transitional time.

“The U.K. must act to secure its economy, but growth will only be delivered if supported by world-class infrastructure,” Marie-Claude Hemming, of the Civil Engineering Contractors Association, said in a statement.

“CECA therefore calls on Ministers to now to first stabilise Government, then re-establish their commitment to the projects outlined in the National Infrastructure Plan, most notably [the High Speed Two Limited train project] and a third runway at Heathrow in order to maintain economic confidence following such a substantial change in the U.K.’s relationship with the European Union and the rest of the world.”

   

Tagged categories: Airports; Asia Pacific; EMEA (Europe, Middle East and Africa); Finance; Funding; Government; Infrastructure; Latin America; North America; Program/Project Management; Rail

Comment from peter gibson, (6/28/2016, 12:27 PM)

The English really bit off more than they could chew. if was mostly labor who voted to leave.They are dumb and uninformed and had no idea of the consequences. Now,labor has lost jobs. Also, more lawyers again.What the hell do they have to do with anything.What mess...enjoy.


Comment from Christian Booth, (6/29/2016, 3:32 AM)

What absolute drivel Peter. You're post highlights your ignorance not only of British politics but also the electorate in general.


Comment from Chuck Pease, (6/29/2016, 5:17 PM)

The whole EU concept was designed to get cheap labor from the the open porous borders. Only corporate entities, multinationals and Banks are the beneficiaries of the EU. To sum it up. Cheap Labor!!! And why in Sam hell would any nation give up it's sovereignty to be any part of any union for that matter. Heres a clue NWO/Global Econonmy!!!! Out comes the tinfoil hat ladies and gents. Peter I hope what you posted is a typo. As it is clear and I agree with Christian on this one.


Comment from Car F., (7/4/2016, 11:33 AM)

Thank you all for commenting on the topic. I agree with Messrs. Gibson and Pease. The British electorate had enough of the impositions of the European Commission and the European Central Bank – both unelected, supranational, unaccountable entities – robbing them of their democratic rights to benefit the bankers and the plutocrats. Unfortunately most of the debate has been focused on the xenophobic aspect of it, rather than on the rebuke to the European elites and their disastrous economic model in detriment of working families.


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