New investment in transport infrastructure is seen as a key plank of a modern industrial strategy, and is central to many local economic growth strategies. But what do we know about the economic benefits that such investment delivers, and how do we prioritise different schemes to maximise any positive impacts?
My ongoing research with co-authors Steve Gibbons, Rosa Sanchis and Teemu Lyytikäinen is providing evidence to help answer these questions. Our latest paper looks specifically at the impact of UK road investment on employment and finds that new investment can produce local economic benefits, even in a mature infrastructure network like the UK’s.
We have found that road-related accessibility improvements between 1998 and 2007 increased local employment. Back-of-the-envelope calculations suggest that major road infrastructure in this period of about £1.8bn a year generated additional jobs worth around £1bn, in addition to all the other benefits that this investment generated in terms of improved journey times.
Overall, these economic benefits are relatively small. These kind of returns are not suddenly going to transform poorly performing economies into powerhouses. We also need to be careful in interpreting these changes as gains to the national economy. To some extent, jobs may be displaced from other areas.
Our work is one of the first attempts to carefully quantify the local economic impacts of existing schemes using real world data on actual investments, and the employment effects that they generated. Our report considered previous infrastructure evaluations from across the Organisation for Economic Cooperation and Development, and found only six that carefully analysed the effect of road improvements on local employment. Of these six, ours was one of only two that detected positive effects.
In light of this, it would be fair to say that while our research provides a first estimate on the impact of new roads in the UK, a number of important puzzles remain. Given how much political attention infrastructure projects attract, it’s clear that improved evaluation of new schemes is badly needed.
We also need to think how to use that evaluation evidence to improve the appraisal of schemes and help inform scheme prioritisation.
The Department for Transport, the National Infrastructure Commission and a number of local authorities are all actively grappling with this question. It is clear from our work, and from conversations with local decision makers, that predicting likely employment and investment impacts should be a key consideration.
Professor Henry Overman is a director of the What Works Centre for economic growth and is a professor in the geography and environment department at the LSE.
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