It’s time to expose the myth that infrastructure investment boosts the economy
Labour claims concrete and railways boost productivity but the numbers tell a different story Neil Record
Published 03 March 2026 6:15am GMT
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The Government has made it very clear that it regards infrastructure spending as a route to improving the productivity of the economy as a whole.
In its June 2025 policy document, UK Infrastructure: A 10-Year Strategy, it opened with the following statement: “High-quality infrastructure boosts growth and plays a vital role in delivering higher living standards.”
It goes on to enumerate the various ways in which it believes this effect works – better transport links; better digital connectivity; more and better housing; higher resilience to extreme circumstances; and so on.
What it has failed to do, however, is make the case that infrastructure spending does indeed create growth. The alternative view is that effective infrastructure spending is a response to demands for it from an already vibrant economy.
It is a pretty important question. If the Government has this wrong, then there is going to be a lot of wasted money and a lot of white elephant projects to show for it, less or no growth – together with a frustrated and impoverished electorate. If the Government has it right, then we should start seeing the fruits of its policies quite soon in renewed growth.
Let’s see whether we can shed any light on this question.
Starting with the construction industry, we should ask, “Is productivity in this sector higher or lower than the overall UK economy?”
Building major infrastructure involves major construction projects, and in a period when infrastructure spending is rising, there will be a direct effect on productivity as construction takes workers from other industries and redeploys them in its own sector.
The Office for National Statistics now publishes sector-by-sector productivity (measured as “gross value-added per hour worked”). In 2024, the latest full year available, the overall economy-wide productivity was £41.80 per hour worked. For the construction sector, it was £38.55. This is not a one-off – the construction sector has always lagged average UK productivity.
So there’s no clear advantage in diverting workers into construction just on the grounds of the inherent productivity of construction activity itself.
Construction activity may look and feel very productive – lots of physical activity; concrete, bricks, steel, machinery, and so on – but the reality is that the addition to our output per hour worked is 8pc lower than the average across the UK economy. It is, after all, a labour-intensive and bespoke activity, both of which mitigate against productive efficiency.
Turning to the second part of the question: is adding infrastructure good for economic growth generally?
We have two recent periods in the UK which might allow us to test that proposition. We can compare high-growth UK (1997-2007), where GDP per capita grew by 2.5pc per year, with low-growth UK (2008-24), where GDP per capita grew by a mere 0.4pc per year. Did infrastructure spending (or lack of it) contribute or not to growth in these periods?
A graph might help here. Figure 1 shows private (market) spending on UK infrastructure each year since infrastructure data became available in 1997.
From this graph we can see that private spending on infrastructure was strongest in the mid-2010s. That spending increased the real stock of infrastructure investment significantly from £245bn in 1997 to just under £400bn in 2024.
But the period of higher infrastructure spending and stock (since 2009) was also the period with the lowest per capita economic growth rate (at 0.4pc per year) for several decades; indeed, if we had accurate data to support the claim, probably for two centuries. So private infrastructure spending does not seem to cause, or even be correlated with, economic growth.
What about government infrastructure spending?
Since ports, water and sewage, energy (gas and electricity) and telecommunications now sit almost entirely in the private sector, this consists mainly of spending on roads, bridges, railways (HS2!), and – if you widen the definition of infrastructure – schools and hospitals.
Government spending on these categories has not been calculated before 2006, so we have less data to go on than private infrastructure, but between 2006 and 2013 state spending on infrastructure was stable at 0.8pc of GDP. In 2014 it jumped to 1pc of GDP, where it has stayed until the latest available year, 2024.
The step-change is almost entirely in transport, and my guess is that HS2 accounts for most of it.
So once again, the higher spending period coincides with a low growth period for the UK economy. Similar to private infrastructure spending, there appears to be no correlation between infrastructure spending and growth rates.
‘Ideology over economic reality’
The Government’s new emphasis on infrastructure, while ostensibly focused on growth, is more naturally viewed as an example of ideology overriding pragmatism and economic reality.
Private infrastructure spending has been rising recently not to construct new North Sea oil platforms but to construct new heavily subsidised offshore wind farms. So heavily subsidised that they are economically, if not legally, part of the public sector.
The same is true of infrastructure expenditure on extending the grid to carry northern and eastern wind-generated electricity to consumers in the South and North West. To secure approval for these projects, the Government is fast-tracking them using the Nationally Significant Infrastructure Projects’ (NSIP) designation, which centralises the planning approval process with the relevant Secretary of State.
In addition, the Government has added data centres to the designation of “critical national infrastructure”, which also fast-tracks planning approval. Data centres are certainly important in modern communications networks. But as long as we have access to data centres somewhere, it is not clear to me that they are a critical component of a modern state.
One thing is clear about data centres – they use very large amounts of electricity, which in the UK is just about the most expensive in the world. Investors are unlikely to choose the UK for their data centres without government subsidy.
In summary, there is no evidence that the UK economy responds in any direct way to infrastructure spending.
In the longer term, it is almost certainly the other way round: that a high-growth sector or region calls for both public and private infrastructure spending to support its success. So, a government that wishes to promote economic growth needs to tackle the root causes of poor economic growth.
These are well established: over-regulation; heavy taxation, particularly on successful businesses and high earners; crowding out of the private sector by a growing and unproductive public sector; expensive energy; and a labour market that is increasingly inefficient from new and heavy regulation.
Fix these, and infrastructure investment will flow naturally. In the meantime, I suspect tens (possibly hundreds) of billions of pounds are going to be wasted on white elephant projects to flatter the egos and the ideologies of our politicians.
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