Infrastructure Investment Plan 2021-22 to 2025-26: major capital projects progress update - December 2023

Major capital projects progress update

The following information relates to projects with a capital value of £5 million or more which are at the Outline Business Case (or equivalent) approved stage or beyond.

The information mainly comprises projects included at Annex D of the Scottish Government’s Infrastructure Investment Plan published in February 2021 and other infrastructure projects which have been commissioned since then.

The majority of information reports the position as at December 2023. All projects are capital grant funded unless otherwise stated.

In the reports relating to activity in the financial years 2021-22 and 2022-23, cost increases have been driven by higher than expected levels of inflation, and delays in projects have been down to supply-chain issues and labour shortages. All of which have been principally driven by a combination of the recovery from COVID-19, Brexit and the war in Ukraine. In this latest report, although high inflation is still a factor for cost increases, and design reviews and scope changes are still leading to time delays, we are now seeing a range of other reasons for variances. These include the availability of funding, change in procurement route, technical commissioning, assurances around construction and issues with the condition of existing buildings. All planned dates and costs in this update are best estimates and may subsequently be subject to further adjustment.

As noted in the 2024-25 Scottish Budget, the UK Government did not inflation-proof their Capital Budget. We have forecast that this will result in nearly a 10% real-terms cut in our capital funding over the medium-term between 2023-24 and 2027-28. This outcome, alongside the construction supply chain issues, labour shortages and high inflation, means that we cannot deliver on all our previously planned capital projects within the funding available.

We remain firmly committed to infrastructure investment as a key factor in securing economic growth and high-quality public infrastructure across Scotland. Unless and until we receive a higher level of funding from the UK Government, the Scottish Government will have to continue making tough decisions to reprioritise our infrastructure projects pipeline to ensure we spend within our means. These decision are, in part, reflected in the reporting presented here; for example, a number of planned projects in the NHS Recovery, Health and Social Care portfolio will be re-assessed as part of a strategic review and the timing of capital investment rephased in line with future funding availability.

Given the worsening outlook for capital which was set out in the UK Government’s Autumn Statement and associated Office for Budget Responsibility’s forecasts, future prospects are more volatile and it is more challenging to plan too far ahead across the board. This directly impacts on our ability to prepare meaningful multi-year capital allocations and to refresh the infrastructure investment pipeline. We intend to revisit the multi-year capital outlook as part of the next Medium Term Financial Strategy in 2024. We will provide information on how investments support wider government goals in the suite of reports to be published in spring/summer 2024 alongside the updated infrastructure investment pipeline. This updated pipeline will support effective scrutiny of projects from concept and initial strategic approvals, through the development and approval of business cases, into construction and to completion.