Impacts of Inflation on UKRI Infrastructure Fund Projects Commission

Overview

The UKRI Infrastructure Team have been tasked by the Infrastructure Advisory Committee (IAC) to develop our understanding of the impact of increasing cost pressures (inflation) on Infrastructure Fund Projects, and what the planned mitigation actions are.  

Why your views matter

Inflation challenges have been acknowledged as a UKRI-wide issue and we are keen to get a better sense of the issues you are facing. We are especially wanting to understand if Infrastructure has particularly unique issues (e.g., higher inflation pressures for building costs). As with other parts of the organisation, the Infrastructure Fund has a fixed budget. All IF projects should have built in plans with how to deal with this, e.g., costed project contingency, seek additional funds from internal sources or explore options to descope.  

We are keen to understand how rising costs have (or might) impact projects both to date and into the next CSR period above initial planning assumptions.  

The commission below is designed as an initial scoping of the impact of rising costs across the Infrastructure Fund portfolio. We are keen that this is kept as a light touch exercise and would hope that it can be completed without needing significant resource. In particular, we are not seeking granular quantitative returns, as we understand that could present a resourcing challenge for colleagues. We request that where possible, we receive one return per Infrastructure Fund project. For any joint projects please agree and submit a single cross council response. 

Next Steps:

We will use the returns to develop a summary of initial findings, which will be presented to the IAC at the March 2024 meeting, outlining the pressures and the impact rising costs are having on the Infrastructure Fund portfolio.  

We have a discussion planned with the UKRI Board Investment Committee in April 2024, to ensure their understanding of the impact of inflation on infrastructure projects in advance of the next Spending Review, where their role is to advise government on UKRI’s needs. We will also share these initial findings with UKRI Finance and Senior Leadership Teams across the organisation to feed into broader conversations on inflationary pressures.  

To be clear – it is not guaranteed that we will be able to source additional funding to manage rising cost pressures. However, it is important that BIC are informed of where delivery is under threat because of decreased real spending power. We understand that inflation will affect all projects differently, and there is unlikely to be a single measure we can apply across R&D. 

It is expected this will be an iterative project which will evolve as it progresses. We may request a follow up conversation with some projects if required.