The UK government’s transport spending has seen a significant increase in recent years, marking crucial developments within the construction and engineering sectors. This financial surge primarily benefited large-scale projects and major firms, leaving smaller enterprises with lesser allocations.
- The Department for Transport (DfT) increased its spending on transport projects by £13.8bn compared to 2019, with construction and engineering firms reaping half of this amount.
- Public sector analyst Tussell reveals that joint ventures received the majority of investments, while only a small percentage went to SMEs.
- HS2 contractors dominated the DfT’s list of biggest suppliers, with Balfour Beatty Vinci (BBV) prominently at the forefront, receiving £2.9bn last year.
- Despite lucrative contracts awarded to major firms, new contract issuance has decreased post-pandemic amid growing uncertainties surrounding large projects like HS2.
The UK government has augmented its transport expenditure, dedicating an additional £13.8 billion last year compared to 2019. This increment highlights the government’s commitment to enhancing transport infrastructure, predominantly channelled through construction and engineering firms. It is important to note that approximately half of this increase was apportioned to such firms, illustrating a concentrated investment approach.
According to analysis by public sector procurement specialist Tussell, there was a significant emphasis on joint ventures capturing the bulk of the new funding. Notably, only 3% of the Department for Transport’s procurement expenditure was allocated to small and medium-sized enterprises (SMEs). This indicates a clear preference for larger entities in the distribution of contracts, potentially sidelining smaller firms in the procurement process.
High Speed 2 (HS2) contractors have emerged as the principal beneficiaries of this intensified government investment, with Balfour Beatty Vinci (BBV) leading the roster of significant suppliers. BBV, responsible for constructing a 90-kilometre stretch from Warwickshire to Staffordshire, has consecutively been the DfT’s largest supplier for three years, with a payment of £2.9 billion last year. Following closely is the EKFB joint venture, tasked with developing an 80-kilometre portion of the HS2 line south of the BBV segment and receiving £1.9 billion from the DfT in 2023.
Despite these substantial disbursements to major contractors, there has been a marked decline in new contract awards since the outbreak of the Covid-19 pandemic. The DfT’s contract awards have plummeted from £2.9 billion in 2020 to figures of £200 million, £449 million, and £183 million in subsequent years, signifying the uncertainties surrounding the HS2 project in particular. Alasdair Reisner, Chief Executive of the Civil Engineering Contractors Association, expressed that this pattern of expenditure is expected given the focus on large capital projects, which inherently favour larger suppliers as primary contractors.
Among SMEs, Land Recovery Enterprises surfaced as the most prominent supplier in 2023, receiving £39 million. Other notable SME suppliers include Loram UK, a railway maintenance firm awarded £34 million, and Hull-based railway contractor Colt Construction, which received £20 million. This modest representation of SMEs within the supply chain reveals an ongoing challenge in broadening participation across varied enterprise sizes.
The significant growth in government transport spending underscores a strategic bias towards large infrastructure projects, primarily benefiting major contractors.
