We must get much better in Scotland at looking after existing building stock, rather than building ‘shiny new things’, said Peter Reekie, the Chief Executive of the Scottish Futures Trust, a public sector organisation, funded by the Scottish Government. 

“People like to see new things coming up around them, they don’t notice so much if we’re not maintaining what we’ve already got so well,” he said at The Business seminar on infrastructure.

He explained that Scotland needs a resilient low-carbon asset base of existing building stock, much of which could be retrofitted for new public uses. However, he recognises there are political considerations on this.

“It’s very difficult to snip the ribbon on a pothole. There is more capital to be made from building new things, that’s the political reality.”

Scottish Futures Trust, which employs a cohort of financial and building expertise across Scotland, works in the sphere of economic, social, housing infrastructure as well as natural infrastructure. The SFT specialist teams work on national projects involving energy, transport, communication, water, flood waste, and with social infrastructure with health, education, emergency services, and culture and justice services.

THE GLOBAL ENERGY SURGE SINCE 1800

Mr Reekie opened his comments at the seminar by looking at the explosion of global energy consumption which started with the First Industrial Revolution.  By 1800, the industrialising world was using 10,000 terawatt hours of energy per year. [A terawatt hour is approximately the equivalent of Dundee’s current energy consumption]. By 1950, the energy demand was 30,000 terawatt hours, trebling use around the world. By 1990, the globe had reached 100,000 terawatt hours per year.  We are now at 180,000 terawatt hours around the world. The UN’s sustainability threshold for the planet means getting back to 1990 levels of energy consumption.

“Since 1990, we’ve added three times as much fossil-fuel powered energy use across the world, as we have renewables. This drug of fossil-fuelled powered energy has fuelled infrastructure and it is incredibly difficult to get off this dependency. We’re still on an upward curve,” he said.

“At the same time, the work we are doing is trying to decarbonise our economy in Scotland. However, this is blowing against a really strong headwind which has accelerated in the post-war era.”

The UK is around 0.8 per cent of global energy use.

“So whatever we do to decarbonised is minuscule. And it raises the question for us is how much of our investment should be going into decarbonisation versus making our economy and our places more resilient to the climate change that is going to happen unless the rest of the world decarbonises. That has to be an increasing question for Scotland.”

Peter Reekie spoke about global game theory: if we all do it and then all the bigger countries decarbonise, we have a chance; but if they don’t, we will need to change our investment patterns.

COST OF INFRASTRUCTURE PROJECTS DOUBLES

“At this level, we have to ask what is the infrastructure that we need to change? We also know that the long-term costs have changed significantly. If we look post-Covid, at 2021, since then there has been a 26 per cent cost inflation on the basic cost of building the asset.”

The cost of ten-year bond borrowing in 2021 was 0.3 per cent, now it is 4.8 per cent.

So adding the cost inflation of the asset, plus the increasing cost of finance, then repaying over 25 years, the cost of that asset is double what it cost four or five years ago.

“The combination of these two effects is one part of leading us to see that deals are much more difficult to do … in our micro world, that shift over a four-year period is making a hell of difference in what we want to do,” he says.

“The big chunky pieces are paid for by consumers. The social and transport infrastructure is paid for by taxpayers. That split changes through time and jurisdictions, with the difference in how they are financed. Public sector infrastructure is usually financed by public sector and debt, although there is private financing in public infrastructure, and now we are seeing elements of public finance into private funded projects, such as the investment banks.”

Peter Reekie sees these changes as a blending of public and private finance for infrastructure projects.

“This is where Scottish Futures Trust does its work, and we’re really interested in doing all of these things better. We fundamentally believe that sustainable infrastructure is a prerequisite for a thriving Scotland.”

The CEO says we need to get better at an infrastructure strategy looking further out in time at the right things for people and places, increasing the pace and the scale.

“We want to take a 30-year look at the infrastructure needs for Scotland which, in a development timescale, is not that long at all. We can do more, and be better at looking further out.”

He said Scotland needs to get better at delivery at the public/private boundary and delivery is generally about people, with the right people on the client side to set up successful projects or the fundamental skills for delivery.

“We need to be a lot better at the management of the assets that we’ve already got. By 2050, 80 per cent of the buildings we have then, we have now. We need to transition our existing asset base to be low-carbon and resilience. We are much better at building shiny new things than looking after what we’ve already got.”

Read more about existing building stock and the carbon saved with the production of existing buildings here.