Not far from where London Mayor Boris Johnson proposes to build an estuary airport, a major marine cargo terminal is nearing completion – built entirely with private funding
Sprawled across a 1,000-acre swath of reclaimed riverbed and post-industrial ruin on the Essex coast, the London Gateway project is a half-formed response to Britain’s economic malaise. But a year from now this giant sandpit will be a world-class piece of infrastructure handling the world’s largest cargo ships – and the government is desperate for similar projects to transform the UK’s economic landscape.
It will also elicit twinges of jealousy from the aviation lobby, as well as Nick Clegg, who called last week for an infrastructure boom. If backers of a Thames estuary airport want to see what they are missing, they should visit the proposed site of “Boris Island” on the northern shores of Kent and look across the water. While the London mayor, business leaders and environmentalists debate the merits of building four runways on the Hoo peninsula, London Gateway is taking shape a few miles away on the south coast of Essex.
Simon Moore, chief executive of the London Gateway scheme, admits that the £1.5bn port and warehouse hub is “not as sexy as an airport”. It is built on a former oil refinery in the Essex marshes, jutting out into the Thames on soil dredged from the river. But when completed it will be an impressive sight: six deepwater berths capable of hosting the world’s largest cargo ships, an 836,000 sq metre logistics park behind those quays, and up to 12,000 jobs on site.
Crucially, there is no taxpayer cash involved: the government needs more projects like this if it is to manage the trick of overseeing a multibillion-pound building spree in transport, telecoms and energy without deepening the deficit. “This is 21st-century, world-class infrastructure [built] at no cost to the UK government. And it will deliver substantial benefits to the UK economy,” says Moore.
Thanks to the deep pockets of DP World – the project’s owner and a subsidiary of the Dubai World conglomerate – 170,000-tonne megaships will be gracing the Thames estuary by the end of next year. But their chances of being joined by an A380 superjumbo look bleak until government policy changes.
DP World worked closely with the UK government on planning London Gateway, but the taxpayer had nothing to do with the funding. Dubai World has a wealthy majority owner in the government of Dubai and the project was supported by a £600m loan from banks, including the European Investment Bank. This project is exceptional, though: new motorways, for instance, would require financial support from the government, while a new Thames airport would only be viable alongside substantial state investment in road and rail networks.
As his Land Rover bumps along pitted tracks that will soon host giant warehouses, Moore explains the logic of the port. “We are trying to make the ships do as much work as possible, so we minimise the amount of time the traffic spends on the infrastructure. So we get as much of the cargo as close as possible to the point of consumption. Hub airports are not dramatically different, and that’s why Heathrow is so successful.”
The south-east consumes a lot of the goods that Asia exports to the UK – clothes, toys, white goods – so London Gateway hopes to convince supermarkets, retailers and cargo owners that they should transport their products via the Essex coast.
According to DP World, the site’s proximity to London will take 65m HGV miles off the roads. That is the equivalent of 2,000 container trucks per day, according to London Gateway.
The government needs more companies like DP World. According to Downing Street’s infrastructure plan, the UK requires £200bn of investment in transport, power and telecoms projects over the next five years and most of the funding will come from the private sector.
The Pension Protection Fund (PPF) and the National Association of Pension Funds have signed a memorandum of understanding with the government to set up an investment vehicle to make it easier for City pension funds to put cash into infrastructure projects, and the PPF expects it to launch next year.
The vehicle hopes to raise between £3bn and £4bn, says the PPF’s chief executive, Alan Rubenstein: “It is pretty clear that the UK has a need to renew and replace some of its infrastructure. The fund we are starting is going to be focused on looking at opportunities in the UK, of which we think there will be plenty. We are hopeful that a number of funds will sign up.” But even these willing contributors are keen for the Treasury to provide some form of guarantee on construction risk.
Boris Johnson believes a privately funded airport is possible. Daniel Moylan, the London mayor’s aviation policy chief, says: “I am reasonably confident that the building of the airport itself will be privately funded.” Under this scenario, landing fees would be the main source of cash. But Moylan admits: “It is very likely that we would nonetheless expect a very substantial government contribution, such as financing the surface access infrastructure.”
More radical plans for building infrastructure are now getting a hearing. The RAC Foundation has called for a “fundamental” change in how motorways and roads are managed and paid for. Those options including privatising the motorway network or placing it in a trust, with maintenance and new construction funded by pay-as-you-drive schemes or tolls, meaning a commensurate reduction in motoring taxes.
Stephen Glaister, the RAC Foundation’s director, says the funding is already there: motorists pay £33bn a year in tax for using a network that costs just £10bn to maintain. “It is not a subsidised market,” he says. “It is one where there is potentially a lot of profitable activity if you get the governance and regulation right.”
Otherwise London Gateway, for all its proximity to the capital, will be an isolated project.