Business, Featured Work, The Spectator, United Kingdom - Wed October 28, 2009

Keep on digging: Boris’s route to recovery

Elliot Wilson says all the razzmatazz for the start of work on Crossrail highlights the construction industry’s urgent desire to soak up public funds before Tory cuts set in.

No major city anywhere has achieved as much as London has with such poor public transport at its disposal. Trams that break down; bendy buses that burst into flames; an underground rail network that overheats in the summer and taxes the patience and the wallets of millions of commuters all year round.

The experience has been likened by London’s own mayor, Boris Johnson, to ‘sardine-tin travel’ — doing little for its citizens’ quality of life, or its reputation as the world’s leading centre for financial services, media and communications.

Such woeful infrastructure also explains why Mayor Boris, a former editor of The Spectator, spent most of Tuesday this week surrounded by a scrum of journalists, advisers and construction-sector lobbyists, peering at a big muddy hole in the ground. This prestigious event constituted the much-heralded launch of Crossrail, a stupefyingly ambitious £16 billion rail project set to straddle London, linking Maidenhead in Berkshire with Shenfield in Essex via Canary Wharf and the Olympic Stadium in Stratford.

Once complete in 2017, the 75-mile-long spanner-shaped rail line, which zigzags north and south of the Thames, will cut travel between Heathrow airport and the City from more than two hours to just 43 minutes. On a more human level, it will herald the arrival of a world-class rail service (heated and air-conditioned) linking central London with the home counties, thus lightening the daily mood of millions of commuters.

Johnson himself lauded the creation of an ‘amazing’ railway crucial to London’s economic prosperity, adding, with typical linguistic panache, that Crossrail’s gliding iron chariots would change the face of the city’s transport system forever.

Like most state-subsidised grands projets, Crossrail inspires a passionate and divergent range of opinions. It may lack the prestige of the Olympics, yet to UK plc — the agglomeration of world-class corporates dotted around London — the benefits are likely to be immense. According to Transport for London (TfL), the project will increase economic output by £36 billion by 2020, creating 15,000 permanent jobs.

Others see Crossrail in a far more damning light. For taxpayers living outside select parts of the southeast, it is just another expensive boondoggle to benefit greedy and undeserving City bankers. Even residents and businesses based along the proposed line — which cuts under Tottenham Court Road on its way between Paddington and Liverpool Street stations — have mixed views.

The anger is most keenly felt in Soho, London’s new-media centre located south of Oxford Street. This pocket-sized district, home to several of the city’s hedonistic subcultures, also hosts many of the world’s most advanced recording studios: million-pound sound installations that record, produce, mix and engineer music scores for global record producers and film studios.

For this unique industry, worth around £750 million a year to Britain, Crossrail will be an unmitigated disaster. Most of these studios are located in the centre of Soho for the very reason that, unusually for London, it remains free of tube lines. Sound engineers at a post-production recording studio such as Grand Central Sound Studios in Great Marlborough Street can safely mix a new Coldplay album, a Nike commercial, or the finale to the Lord of the Rings film trilogy, without needing to edit out the long, slow, nearby rumble of a subterranean train.

Ivor Taylor, Grand Central’s technical director, has been fighting Crossrail for three years: the firm has spent £150,000 on legal bills alone as the scheme meandered its way through the political byways of Whitehall. Some concessions have been made — notably an agreement to lay expensive but quieter rubber tracks along the Soho stretch of the line. And, to be sure, the project will benefit this cottage industry in the long term, transferring clients to and from Heathrow in record time.

But many worry that a steady, low hum of trains will drive the industry out of Soho, or out of business altogether. ‘The line goes straight under us, 20 metres down,’ says Taylor. ‘We have world-class sound-isolated studios, but when the boring machines go through, there will be a short period of time when we won’t be able to do very much at all. After that, if Crossrail makes too much noise then they’ll have to pay for additional sound proofing — but we are the only facility that has got this arrangement.

‘There is nothing like Soho in the entire world, from the theatres of the West End to the post-production studios making the ads you see on television and the sound tracks for Harry Potter,’ cautions Taylor. ‘All of that is under threat.’

Others see Crossrail in rather less jaded terms. For Britain’s leading construction firms, reeling from the worst recession on record, a multi-year, billion-pound project demanding the highest engineering standards is manna from heaven. Few sectors have been hit harder by the recession, from self-employed plumbers and joiners right up to major construction firms such as Balfour Beatty, Carillion and Sir Robert McAlpine. New housing starts this year are at their lowest levels since 1924, while commercial real estate is suffering its sharpest contraction in 85 years. According to the Construction Products Association, an industry mouthpiece, the development of new industrial facilities is set to fall by 44 per cent this year, and a further 8 per cent next.

Amid this gloom a chink of light has come from major infrastructure projects, which have, thanks to a mixture of good luck and good timing, remained relatively isolated from the industry’s general malaise. Construction firms, seeking a way to keep their heads above water, cling to these projects with increasing desperation.

Some of these projects have fallen fortuitously into the industry’s collective lap — notably the £10 billion 2012 Olympic complex, which is being built by a consortium of Britain’s biggest construction firms. Others are long-term projects such as the Thames Tideway Scheme, set to improve London’s sewerage system at a cost of up to £5 billion, and the £5 billion plan to widen several sections of the M25.

And a few contractors have benefited from Gordon Brown’s determination to stimulate the British economy through Keynesian spending — seen by the construction industry as a signed invitation to push through any long-standing infrastructure scheme. ‘Around November 2008, Brown said to us: “Do it now — get any major construction plan together and present it to us, and the money is available. If you can’t do that plan, do another one. The money is there now, but it won’t be there forever.”’

Such largesse, mirrored by governments from Washington to Beijing as they seek to kick-start ailing economies, has worked in part. Major projects have added heft to the finances of construction firms, many of whom benefited handsomely from an industry boom that stretched for about eight years until late 2007.

Some British firms used that period wisely, branching out into new markets and services. Wolverhampton-based Carillion plc, which is strong in the Middle East and Canada, shifted its focus toward support services and government projects over the past eight years. Balfour Beatty, the UK’s largest construction firm with revenues of £10 billion last year, is currently financing the £380 million acquisition of US engineering and management services firm Parsons Brinckerhoff, a deal that will boost Balfour’s workforce by 12,000 to 42,000, and push Balfour into the top
ten of global construction firms.

Yet many industry leaders remain worryingly dependent, for the time being, on home-grown infrastructure projects. And for an industry prone to expecting and planning for the worst, a further cloud has settled in on the horizon, in the form of impending political change.

Shadow chancellor George Osborne has of late taken a resolutely tough line over public spending. One way to staunch Britain’s financial wounds, clearly, would be to slash some of the planned major infrastructure projects — from road-widening to £15 billion high-speed rail lines on Britain’s east and west coasts.

Both in public and in private, Osborne has distanced himself from any outright decision to cut back on major existing projects. For one thing, more than 40 per cent of the construction sector’s finances are generated by public sector schemes. Kicking an industry experiencing the ‘sharpest fall on record’, to quote the CPA, would make little sense.

Yet that has done little to allay fears that an incoming Conservative government would shelve, delay or at least chip away at, major projects. Already, individual projects like the much-needed refurbishment of Tottenham Court Road tube station, a key halt on the Crossrail line, are being quietly delayed into next year and perhaps beyond. The CPA predicts that the industry will not return to the record high activity levels of 2007 for at least a dozen years. It also warns: ‘It will be the extent of the public sector spending cuts that will determine the length of the construction recession.’

Don Ward, chief executive of Constructing Excellence, an industry consultancy, sees ‘a long, low period ahead’ for the entire sector. Most projects already underway, such as the widening of the M25, will continue as planned, believes Ward. But those still in the planning stages, such as the widening of the M6 and the M6 Toll road, both billion-pound projects, must, he believes, ‘have serious question marks hanging over them’. A host of smaller local or regional authority projects, from roads to schools, may also be tapered back as Osborne seeks to balance the books, warns Ward.

This explains, as one industry executive notes, the desire of local authorities and construction firms to ‘dig holes in the ground while they can’. London’s streets are curiously clogged with workmen laying pipes and installing all manner of traffic-calming instruments, from bollards to redundant traffic lights, while there’s still money available. ‘One might see these as dog-days for one political party, and the last of the golden days for [construction firms],’ says the industry executive. ‘A Cameron administration is much less likely to view big holes very favourably.’

That brings us neatly back to the eccentricities of Crossrail, described by Don Ward as an ‘iconic project important beyond its sheer size, based on an understanding about what truly great infrastructure can do for the rest of the economy’. Few in the rarefied world of politics or industry doubt that, had the project been started any later, it would have been scrapped completely, or at least chopped to a fraction of its size — probably turning it into a new, trans-London tube line stretching from, say, Heathrow to Canary Wharf.

With Mayor Johnson having already dug his hole in the ground and peered into it, no one — not even his old chum, chancellor-in-waiting Osborne — will dare to pull the plug on Crossrail. The Mayor said as much to Tuesday’s throng, declaiming with some vehemence that both Osborne and Cameron were ‘on the same page’ as him on Crossrail. The political and economic significance of the project to UK plc is just too great, probably greater than either the Channel Tunnel or the Olympics. Yet much can happen between now and 2017. If Osborne is unable to tame Britain’s deficit crisis and debt spirals out of control, projects such as Crossrail will be first in the firing line.

Even now, many industry experts believe that Osborne will shave a few strips off Mayor Johnson’s mega-project as soon as he is safely ensconced in Number 11. This might involve trimming the cost to £10 billion from £16 billion by cutting the number of stations at either end of the line, while maintaining the vital high-speed section linking Canary Wharf with central London and Heathrow.

Another plan might be to stretch the project’s longevity, pushing the completion date out to 2023, so reducing Crossrail’s annual budget. That would continue to top up construction industry earnings, while reducing the pressure on public finances. If it happens, a few million commuters will feel mightily miffed, along with some founder-members of UK plc. But at least Johnson’s iron chariots will continue to glide smoothly into the future, if with slightly less fire and fanfare.

Read the article online at: www.spectator.co.uk/columnists/any-other-business/5482068/keep-on-digging-boriss-route-to-recovery

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