Importance of Infrastructure Investment in the UK

Chapter 1 – Introduction

1.1 Rationale for the Study

‘Infrastructure forms the economic backbone of the UK. It is the fabric that defines us as a modern industrialised nation. The standard and resilience of infrastructure in the UK has a direct relationship to the growth and competitiveness of our economy.’ (Skinner, 2010)

‘For the UK to retain its competitive edge, a longer-term view of investment in infrastructure must lead policy making.’ (Stewart, 2009)

This dissertation offers an opportunity to explore and research a highly topical issue. The United Kingdom finds itself still in the midst of one of the worst economic downturns in recent memory and in a period of fiscal consolidation. As a result of this depressed economic situation, difficult decisions have had to be made by all sectors within the UK to work together to drive the country out of the recession.

The recent edition of the Economic and fiscal Strategy Report and Financial Statement and budget by the Chancellor of the Exchequer, highlights the importance of implementing measures that will promote sustainable growth. Despite modest growths to GDP of 0.4 per cent in the final quarter in 2009 (NSO, 2010), the general consensus is that the United Kingdom is in the early stages of recovery. The 2010 budget, called ‘Securing the recovery’, outlines ways in which it aims to support this vision. One of these policies, is to ‘invest in infrastructure, including additional funding for transport and local roads and creating a Green Investment bank.’ (UK Budget, 2010)

Also, the Eddington Report, published on 1 Dec 2006, was a study jointly commissioned by the Secretary of State for Transport and the Chancellor of the Exchequer. Its role was to analyse the long-term relationships, within the boundaries of the Government’s wider commitment to sustainable development, between transport and the UK’s growth, stability and economic productivity. The findings of this study will be discussed and compared to the investment required to meet the future demands of the UK.

Furthermore, in a recent study carried out by the British Chambers of Commerce (BCC), it revealed that inadequate energy, transport, and communications infrastructure continues to reduce the opportunity for UK businesses to grow. It also outlines that during this period when businesses play a vital role in the recovery of the economy, productivity is being affected as a result of lack of capacity, thus restricting the UK’s economic potential. (BCC survey, 2010)

In response to the survey carried out in 2010, David Frost, the Director general of the BCC stated the following:

‘A country’s infrastructure is crucial to the success of its businesses. In the current environment of economic uncertainty and public spending constraints, our energy, digital, and transport networks must be up to the job if business is to deliver growth and create employment.’

The intriguing situation that the UK Government now face is deciding the best way to stimulate economic growth without increasing the deficit. One of the issues with increasing deficits is the Government will have to borrow to service the debt. As a result of the world-banking crisis over the last few years, there is reluctance to increase the UK debt further and therefore this might have an impact on infrastructure investment in this country.

This dissertation provides an opportunity to research the level of infrastructure required in the UK and review the part it plays to the long-term sustainable growth of the UK economy. Furthermore, in doing so, the author intends to see if further investment in Infrastructure works is viable in the current economic climate.

1.2 Aim

The aim of this dissertation is to assess the importance of infrastructure investment in the United Kingdom and how this impacts on the long-term sustainable growth of the UK Economy given the current economic constraints.

1.3 Objectives

To review Fiscal and Monetary policy theories available to the UK Government.

To review the current and future demands for infrastructure works in the UK.

To understand the level of importance of infrastructure work investment to the UK economy.

To understand the roles, responsibilities and options available to public and private bodies in raising capital to invest in infrastructure works in the UK.

To highlight the economic and social benefits gained as a result of increased investment in chosen infrastructure sectors by utilising hypothetical cost model projections.

1.4 Outline Methodology of the Research

1.5 Dissertation Contents

Chapter 2

Provides an extensive Literature review on the topic area. The author will provide a general overview of economic theory, introduction to infrastructure, and a review of the relevant studies published worldwide that reveal intellectual thoughts on infrastructure investment impact on the economy. This will be carried out in the way of both descriptive and an analytical approach to all the appropriate literature sourced to aid in this dissertation. Naoum (2007) states ‘It is descriptive in that it describes the work of previous writers and it is analytical in that it critically analyses the contribution of others with a view of identifying similarities and contradictions made by previous writers’.

According to Naoum (2007), the literature review will serve two purposes.

First, it allows for gathering of information to allow development of issues and themes within the chosen topic that ultimately shape the research design.

Second, the literature review will help form the basis of the research design by analysing previous research designs.

Chapter 3

Chapter 3 introduces the reader to the numerous research techniques available to the author and will highlight the strengths and weaknesses of each and merits of each approach, before indicating the chosen methods of quantitative analysis technique

Chapter 3 examines the various research techniques that were available to the author and describes the strengths and weaknesses of each of the approaches in respect to the available data. In particular this chapter presents the reasoning behind the author’s decision to adopt the quantitative analysis technique and explains how this approach was applied. This chapter also describes the source of the data and highlights any potential bias or limitations that the author experienced within the analysis. Furthermore this chapter explicitly explains the process for selecting and categorising the appropriate data prior to analysis in a consistent manner. John Hannah paragraph

Chapter 4

Chapter 4 builds upon the process described in the previous chapter and examines the primary source of data to assess what trends are evident with each of the particular categories. This section goes on to expand upon the original quantitative analysis and examine a series of quantitative case studies to assess the extent of early warning events and compensation events that occurred on completed projects. John Hannah paragraph

Chapter 5

In conclusion, chapter 5 summarises the findings of this research and consider if the original aim and objectives have been achieved. Finally, this chapter discusses the author’s findings and proposes a list of recommendations for future studies. John Hannah paragraph

Chapter 2 – Literature Review

2.1 Introduction

‘The purpose of research is to make a contribution, however small, towards understanding the phenomenon being studied and ultimately towards the total body of knowledge’ (Parahoo, 2006)

The intended purpose of the following literature review is to provide a general background to the chosen topic that will aid in the understanding of the following areas:

How the UK Economy functions and what factors drive it.

Description & analysis of previous research on the impact of infrastructure investment on the economy.

The role the construction industry plays in the UK Economy.

The information presented within the literature review will enhance the reader’s knowledge of the topic with a view of providing clarity and understanding on the findings presented in chapter 4.

Economic Theories

‘There are conflicts of opinion on economic theory. For instance, monetarists argue that rises in the money supply cause inflation whereas Keynesians argue that it is changes in inflation which cause changes in the money supply’ (Stanlake & Grant, 1995)

Keynesian Economics

John Maynard Keynes was a British economist whose ideas have been a central influence on modern macroeconomics, both in theory and practice. He advocated interventionist government policy, by which governments would use fiscal and monetary measures to mitigate the adverse effects of business cycles, economic recessions, and depressions. His ideas are the basis for the school of thought known as Keynesian economics.

Keynes’ solution to poor economic state is to introduce impetus spending or as the US President Franklin Roosevelt described, ‘prime the pump’. Keynes argues that the government should step in to increase spending, either by increasing the money supply or by actually buying things on the market itself.

A supporter of Keynesian economics believes it is the government’s job to smooth out the bumps in business cycles. Intervention would come in the form of government spending and tax breaks in order to stimulate the economy, and government spending cuts and tax hikes in good times, in order to curb inflation.

Alternative Economic Theories

Since Keynesian economics advocates for the public sector to step in to assist the economy generally, it is a significant departure from popular economic thought, which preceded it €” laissez-fair capitalism. Laissez-fair capitalism supported the exclusion of the public sector in the market. A number of laissez faire consequences are drawn from Say’s law. Say also advocated public works to remedy unemployment.

Say argued against claims that business was suffering because people did not have enough money and more money should be printed. Say argued that the power to purchase could be increased only by more production and is also best known for coining the phrase supply creates it’s own demand (Curwen, 1997)

James Mill used Say’s Law against those who sought to give economy a boost via unproductive consumption. Consumption destroys wealth, in contrast to production which is the source of economic growth. The demand for the product determines the price of the product, but not if it will be consumed. Alternatively, Keynes is an advocate of trying to stimulate consumption by government intervention.

Views on Economic thoeries

“Cutting support now, as some are demanding, would run the real risk of choking off the recovery even before it started, and prolonging the global downturn.” (Darling, 2009)

“If consumers, markets and businesses get the message that government wants to carry on spending and isn’t serious about dealing with the deficit, they will start to conclude that the UK is no longer a safe place to invest in, spend in or build a business in,” (Cameron, 2009)

Importance of Construction industry to UK Economy

A recent survey commissed by the UK Contractors Group and carried out by LEK Consulting to demonstrate the impacts of the Construction industry on the UK Economy was distributed September 2009. The main aim of this report was to specifically highlight the benefits of investing in construction. The report covered 3 main areas:

Contribution of the construction industry at national and regional level.

Key contribution that construction makes to national employent levels.

The role that the construction industry plays in the broader economic and social objectives.

The reports contention is that the construction industry is vital to the overall UK economy while still being in a recession as it provides the following:

Construction is a major contributor to the UK DGP.

Construction sector employs circa £3m people throughout 300,000 firms.

Construction is also an important driver for other sectors, without which there would be a loss of domestic production capacity and skills.

The report, ‘Construction in the UK economy: The Benefits of Investment’, shows that construction is the best sector for stimulating employment.

It also shows that every £1 spent on construction leads to an increase in GDP of £2.84, as the spending not only creates construction output worth £1, but also stimulates growth elsewhere in the economy worth £1.84.

‘With the Chancellor’s Pre-Budget Report looming, the CBI is continuing to press the case for protecting capital spending by government.’ (John Cridland, CBI Deputy-Director General, 2009)

‘A strong economy needs fit-for-purpose schools and hospitals, and it will be the construction industry that builds the new transport and energy infrastructure needed to shift to a low-carbon economy. (John Cridland, CBI Deputy-Director General, 2009)

Introduction to Infrastructure Works

Infrastructure investment impact: Previous Research

Over the last 30 years there have been various economic models developed to help in the research of the impact of infrastructure investment on the economy. The in-depth empirical studies have mainly utilised macro-economic level data, which includes cross-state and cross-country data. (Straub, 2007) edinburgh paper

According to the studies carried out by Aschauer (1989) he states that when analysing the importance of public investment to the productivity improvement and economic growth, added weight must be attributed to the public investment decisions made by the Government. Furthermore, the study indicates increased productivity and growth in the economy by investing in areas such as highways, sewers, streets, and water systems.

To ascertain these findings, Aschauer took the average annual growth rates of total factor productivity and the non-military public capital stock in America over the period 1950-1985; Aschauer’s data indicated a close relationship between level of investment in non-military infrastructure and productivity. Put in Tables from study

Further research in the United States carried out by Munnell (1990) analysed the impact of the stock of public capital on economic activity at the regional and state levels. In conclusion, Munnell found that the US states that had invested in infrastructure had greater output, increased levels of private investment, and high levels of employment growth.

The study highlighted above, Aschuer (1989) estimated an elasticity of output with respect to public infrastructure capital in the United States during 1950-1985 of between 0.38 and 0.56. These results have been shown to be econometrically suspect and subsequent work suggests the elasticity is much smaller. The average elasticity across OECD countries for the period 1960-2001 has recently been estimated to be 0.2 (Kanps, 2004). Aschauers paper has, however, proved very fruitful in terms of subsequent research, which it stimulated. (Crafts & Leunig, 2005)

A number of empirical studies have looked at the relationship between all public infrastructure investment and GDP growth. On average these studies seem to indicate a positive elasticity of output to public capital of around 0.20. Put another way, a ten per cent increase in public capital stock increases GDP by around 2 per cent. (Eddington report 2006)

The eddington report suggest that there are limitations to these empirical studies and the results should be viewed with caution. OECD (2003) argues that early empirical work on the link between infrastructure investment and economic performance overstated the magnitude of the impact on GDP and productivity growth (The sources of economic growth in OECD countries, OECD, 2003) In particular, studies that focus on public investment in capital and infrastructure in a broad sense, rather than on transport specifically, do not really distinguish between types of investment in terms of new build, upgrade, maintenance etc although some do make specific conclusions about the value of transport infrastructure investment.

Later studies using more complex modelling suggest a positive, albeit weaker relationships between infrastructure and GDP. These include: Kocherlakota and Yi (1997), Demetiades and mamuneas (2002), O’Fallon (2003), and Nijkamp and Poot (2004). (see figure 1.5 eddington report 2006)

In 1993, Easterly and Robero carried out further research to expand on the work in this field. Called Fiscal Policy and Economic Growth: An Empirical Investigation, it details several conclusions that support the findings expressed by Aschauer’s research in 1989. It tackled areas such as the rate of growth and the level of development by employing historical data and recent cross-section data.

The main findings outlined that there is a strong relationship between a countries fiscal structure and the development level and that investment levels in communication and transport is consistently correlated with growth. This therefore indicates that infrastructures are important in the economic prosperity of a nation (Easterly, Robelo 1993). Put in reference

Eisner (1991) highlighted that public infrastructures not only serve as an intermediate good in physical goods production, they can also be final consumption goods. For example, water and sewage systems benefit environment, better transportation saves time spent on travelling, public parks give people pleasure, etc. Canning, Fay, and Perotti (1994) found substantial effects of physical infrastructure on economic growth based on the international data set.

The strategy for national infrastructure also states, ‘The majority of empirical research indicates that there is positive relationship between infrastructure and economic growth’ (strategy for national infrastructure, 2010).

Introduction to Infrastructure

What is Infrastructure?

Set-up in December 2009 to help meet the infrastructure requirements in the UK for the next 10-20 years, Infrastructure UK defines Infrastructure as key economic sectors which include: Water, Waste, Energy, Transport and communications (strategy for national infrastructure, 2010).

Infrastructure networks enable people, goods, energy, information, water, and waste to move efficiently around the UK and, in some cases, across its borders. The extent, capacity and quality of these networks has a direct bearing on the economy of the UK, the environment and the quality of life of everyone who lives in or visits the UK.

Infrastructure Studies in the United Kingdom

Extensive research carried out in the United Kingdom has indicated the level of infrastructure required for each sector and this can be cross-referenced with studies highlighted in the previous section.

For example, the findings from the research carried out by Eisner, 1991 and Easterly, Robero 1993 indicated a relationship between transportation and its impact on the growth of the economy.

The Eddington report was published on the 1st December 2006 and was carried out by Sir Rod Eddington under the instruction of the UK Government. The report is an examination of the impact transportation decisions will have on the UK environment and economy.

The report analyses the current global economic demands and how our current transportation infrastructure must meet the demands of the 21st century. It states that with rising population and resultant greater demands on the country, higher levels of congestion and issue with reliability will have adverse effects on the economy if the correct infrastructure is not in place. It contends that by not having the required infrastructure in place it costs businesses more money while also effecting people’s social environment (Eddington Report, 2006).

As well as utilising the Eisner, Easterly and Robero findings, the Eddington Report drew on research carried out in more recent times. The studies used in the development of the Eddington Report comprised: The historical significance of Transport for Economic growth and Productivity (Crafts & Leunig, 2005), Step change transport improvements (Mann, 2006), and transport and labour market strategies (Gibbons & Machin, 2006)

Assessing transports contribution to the economy

Transport can impact on the performance of the economy in a number of different ways:

Transports impact on GDP – Transport can impact on the economy and will ultimately impact on overall output. Gross domestic product (GDP) is currently the best measure of the size of the economy as it measures the total value of goods and services provided. Transport can have an impact on economic output (GDP) thorugh two channels:

Firstly, transport can affect GDP though a number of inputs that are used, for example transport may increase employment either by allowing greater access to labour or stimulating the creation of new firms, which can increase the number of goods and services produced and lead to an increase in GDP.

Secondly, transport can improve the efficiency with which firms use inputs, in other words transport can have an impact on productivity. For instance, a well functioning transport network can raise productivity by redusing journey times. Transport investment can impact on the drivers of productivity by encouraging prictae investment through raising its profitability; facilitating labour mobility and thereby increasing the returns in investment skills; and enabling effective competition even when economic activity is geographically dispersed. Identifying the impact of transport on productivity is important because improving productivity is a key to determinant of long-term growth and living standards.

These effects can either have a one -off effect on the level of productivity or a sustained impact on the growth rate of productivity. Transport can impact on the growth rate of productivity by stimulating innovation through its impact on agglomeration economies, trade and foreign direct investment. In practice these dynamics are very difficult to measure, but are nevertheless extremely valuable, as they determine how quickly the economy grows and therefore the rate of growth in GDP.

Transports role in supporting quality of life

Critically though, GDP measures alone fail to capture the impacts of transport on the environment or its contribution to the wider well being of society. Transports impact on the environment, for example through carbon and other emissions, can increasingly lead to unsustainable growth, as well as impacting on peoples quality of life. Transport improvements that free up wasted travel time allow people to spend more time with friends and family, and enjoy more leisure activities. An economic welfare measurement would seek to measure such broader impacts of transport on society and the environment rather than just a pure GDP measure. These benefits to general well being are known as economic welfare, or welfare.

The use of existing transport networks: What benefits do provide

Erenburg (1994) finds that policy measures that make more efficient use of existing transport infrastructure through pricing mechanisms or other traffic management solutions can have a significant impact on growth (linking public capital to economic performance, Erenburg, 1994)

Hulten and Schwab (1996) estimate that a 1 per cent increase in infrastructure effectiveness would have an impact on growth seven times larger than a 1 per cent increase in the rate of public infrastructure investment. (the public capital hypothesis: The case of Germany, Hulten and Schwab, 1996)

OECD/ECMT (2001) paper on the benefits of transport concludes that ‘wider economic benefits may be achieved more efficiently by introducing prices which correspond more closely to costs, or by reallocating existing infrastructure more efficiently between users, or by adopting other transport policies. (Assessing the benefits of transport, European Conference of Ministers of transport, OECD, 2001)

Victoria transport policy institute (2003) argues that investment in alternative modes of transport and in management strategies to encourage more efficient use of existing road capacity tends to provide greater economic benefit than expanding existing highways to reduce congestion. The study also argues that the benefits of transport improvements are heavily dependant on local circumstances, in that they will only increase economic development where inadequate transport is a significant constraint on economic activity.

EVIDENCE OF CONDITIONS NECESSARY FOR TRANSPORT TO IMPACT ON THE PERFORMANCE OF THE ECONOMY

Caning and Fay (1993) assert that infrastructure should not be seen as a factor of production but as a condition for high growth. Kessides (1993) notes that infrastructure does not create economic potential; it only develops such potential where appropriate conditions exist, i.e. other inputs such as labour and capital are available to drive output growth.

Indeed, lynde and Richmond (1993), Trinder (2002), and O’Fallon (2003) assert that public and private capital are complements; that physical infrastructure requires the existence of available productive private capital in order to realise economic growth potential, and that infrastructure investment can boost the productivity of such private capital. Infrastructure investment may also feed through to increased labour productivity.

Canning and pedroni (1999), banister and berechman (2000), Trinder (2002) and O’Fallon (2003) highlight other important underlying conditions that will influence the impact of transport investment on the economy (SEE REFERENCES FIGURE 1.7 EDDINGTON REPORT)

In summary, these include:

Economic conditions, a stable macroeconomic policy climate, local market circumstances, agglomeration, and labour market conditions

Investment conditions; available funds, timing and structure of investment, type of infrastructure investment, location of investment in terms of network structure and political and institutional conditions, decision making, planning, sources, and methods of finance, level of investment, supporting legal and organisational policies and processes, and method and governance of infrastructure delivery and provision.

Funding and delivery mechanisms for UK national infrastructure

The National Infrastructure is funded and delivered in a number of ways:

Commercially driven, user-paid infrastructure e.g. unregulated airport and ports where it is for the developer to decide what and when infrastructure is built. Any developments is then paid for by consumers (but prices are not regulated because competition exists)

Commercially driven, user paid but price-regulated infrastructure with a stronger role for Government. Regulated airports are an example. Government supports investment in additional capacity but this is a commercial decision for airport operator (and where prices are regulated to protect from monopoly power). The energy sector also largely follows this model but prices are set by the market or thorough Government intervention.

Price regulated businesses where independent regulators play a stronger role in determining the level and nature of investment. For example, water, where the regulator has an input into the nature of the investment programme but infrastructure investment in funded by users.

Price regulated business that is funded by the taxpayer and users e.g. Network Rail. This is a model where the business is funded both by users and taxpayers where the DfT have a central role in setting out the outputs it wants from the railways and the level of funding to achieve that. The regulator sets the efficiency targets and prices for the company.

Publicly decided and publicly funded infrastructure e.g. roads. Government decides where they should go, when they should be built and pays for them. This may include some provate finance but ultimately government rather than users pay. Clearly Government enjoys much greater control over infrastructure, but only a small part of the overall picture.

Infrastructure essential for supporting economic activity and growth

Many key investment projects rely on private finance either as direct investment or through mechanisms such as PPP’s. In the current economic climate the Uk faces stiff competition in securing investment – from private investors and from within Government budgets. In this environment, there needs to be a clear vision from Government about the future and needs for infrastructure. This will be essential to persuade the provate sector to invest in the national infrastructure and, in particular, provaste sector investors need long-term certainty in order to judge whether to commit major funds.

Chapter 3

This chapter gives a brief description of the methods used for collecting independent data and why they are relevant to the research objectives.

Research Strategy

Quantitative

“Quantitative research is ‘objective’ in nature. It is defined as an inquiry into a social or human problem, based on testing a hypothesis or a theory composed of variables, measured with numbers, and analysed with statistical procedures, in order to determine whether the hypothesis or the theory hold true” (Cresswell, 1994). This statement is expanded on further by Bouma and Atkinson (1995), who state “Quantitative data is, therefore, not abstract, they are hard and reliable; they are measurements of tangible, countable, sensate features of the world.”

When endeavouring to find information on concepts, attributes and collating factual information and evidence on the relationships of these facts in order to appraise a theory or hypothesis, a quantitative research method should be employed.

Qualitative

“Qualitative research is ‘subjective’ in nature. It emphasises meanings, experiences (often verbally described), description and so on. The information gathered in qualitative research can be classified under two categories of research, namely, exploratory and attitudinal.” (Naoum, 2007)

As explained by Dr Naoum, qualitive research can be split into two areas of research, firstly “exploratory research is used when you have limited amount of knowledge about your topic. Here, the interview technique is usually selected as a method of data collection” (Naoum, 2007) and secondly “attitudinal research is used to ‘subjectively’ evaluate the ‘opinion’, ‘view’, or the ‘perception’ of a person, towards a particular object. The term ‘object’ is referred to as an ‘attribute’ a ‘variable’, a ‘factor’ or a ‘question’. (Naoum, 2007)

It is also essential to remember that “the data gathered under the qualitative research can later be ‘quantified’ to some extent but a qualitative approach tends to value the data as ‘qualitative’.” (Coolican, 1993)

Data Collection

Within this dissertation, options for the main source of data collection include surveys and interviews, which have been selected due to the nature of the research topic and information, required to complete the report.

Generally, data collection can be split into two categories of fieldwork, which is the primary data collection and desk study, which is secondary.

Fieldwork

“The term ‘fieldwork research’ refers to the methods of primary data collection used by the researcher and attention should be paid not be confused with the definition of field research as ‘the study of people acting in the natural courses of their daily lives’.”(Naoum, 2007)

This form of research can be broken down into three main approaches:

Survey

Case study

Problem-solving approach.

Experimental or observational approaches can also be used for research purposes, however, these methods require to be carried out over long periods and there is more responsibility for detailed outcomes.

The survey approach

“Surveys are used to gather data from a relatively large number of respondants within a limited time frame. It is thus concerned with a generalised result when data is abstracted from a particular sample or population. There are two types of surveys available: the descriptive survey and the analytical survey.” (Naoum, 2007)

“The descriptive survey aims to answer such questions as: How many? Who? What is happening? Where? And When? It deals with counting the number of respondants with certain opinions/attitudes towards a specific object. The counting can be later analysed to compare or illustrate reality and trends.” (Naoum, 2007)

“The analytical survey aims to establish relationship and association between the attributes/objects of your questionnaire, i.e. how often an attribute is associated with another attribute within the sample questionnaire.” (Naoum, 2007)

Case study approach

“Case studies are used when the researcher intends to support his/her argument by an in-depth analysis of a person, a group of persons, an organisation or a particular project. As the nature of the case study focuses on one aspect of a problem, the conclusion drawn will not be generalised but, rather, related to one particular event. This is not to say that the case study approach is of limited value. On the contrary, it provides an in-depth analysis of a specific problem” (Naoum, 2007)

Within the case study approach, there are three types of case study approach, which can be utilised to provide evidence or information on the given topic. The three types are descriptive, analytical and explanatory case studies.

“The descriptive case study which is similar to the concept of the descriptive survey (i.e. counting), except it is applied on detailed case(s).” (Naoum, 2007)

“The analytical case study which is similar to the concept of the analytical survey (i.e. counting, association and relationship), except it is applied on detailed case(s).” (Naoum, 2007)

“The explanatory case study, which is the theoretical approach to the problem. It explains causality and tries to show linkages among the objects of the study. In other words, the researcher collects facts and studies the relationship of one set of facts to another, with the hope of finding some casual relationship between them.” (Naoum, 2007)

Problem solving approach

“With the survey and the case study approach, the researcher tends not to affect or interfere with that which is being studied. In the problem solving approach (also named action research), the researcher reviews the current situation, identifies the problem, gets involved in introducing some changes to improve the situation and, possibly, evaluates the effect of his/her changes.” (Naoum, 2007)

Secondary data collection

Not unlike primary data collection which is taken first hand, secondary data collection is established from literature searched and as such is classed as a desk study.

“The most significant of the advantages of the secondary data are related to time and cost. In general, it is much less expensive to use secondary data than it is to conduct a primary research investigation. This is true even when there are costs associated with obtaining secondary data. When answers to questions are required quickly, the only practical alternative is to consult secondary sources.” (Stewart & Kamins, 1993)

Data collection techniques

Further to the decision of how data is to be collected and the method of research to be used, we are able to evaluate the best technique of data collection. Initial proposals for this research dissertation for the main form of data collection include both a quantitative and a qualitative approach. Structured interviews will be one of the highlights of the research topic, as this will source primary data from industry professionals. Postal Questionnaires are also a popular method to be considered.

Postal Questionnaire

“The postal questionnaire is probably the most widely used data collection technique for conducting surveys. It is most suited to surveys whose purpose is clear enough to be explained in a few paragraphs of print, in which the scheme of questions is not over-elaborated. Postal questionnaires have been widely used for descriptive and analytical surveys in order to find out facts, opinions and views on what is happening, who, where, how many or how much.” (Naoum, 2007)

The use of postal questionnaires, have three main advantages of economy, speed and consultation, which have been outlined as follows:

“Economy. Postal questionnaires are perceived as offering relatively high validity of results because of their wide geographic coverage. As a result, it is more suited to assembling a mass of information at a minimum expense in terms of finance, human and other resources.” (Naoum, 2007)

“Speed. Postal questionnaires are certainly a quick method of conducting a survey. If administered properly, the bulk of the returns will probably be received within two weeks. However, time must be allowed for late returns and responses to follow-up attempts.” (Naoum, 2007)

“Consultation. In certain cases respondants may not have the information to hand, particularly when the questions are of a quantitative nature, and may need to consult a document or a colleague in order to give accurate answers.” (Naoum, 2007)

Although there also limitations to using postal questionnaires, mainly that they must contain simple questions, inflexible technique, accuracy, no control over responses and industry fatigue.

“Must contain simple questions. The postal questionnaire is only suitable for simple and straightforward questions, which can be answered with the aid of easy instructions and definitions. The questions should be very carefully worded and free from faults such as ambiguity, vagueness, technical expressions, difficult questions and so forth.”(Naoum, 2007)

“Inflexible technique. Inflexible in the sense that postal mail questionnaires do not allow the opportunity for probing. In other words, the answers have to be accepted as final and there is no opportunity to clarify ambiguity or to appraise the non-verbal behaviour of respondants, though the latter can sometimes create bias.” (Naoum, 2007)

“Accuracy. Respondants may answer generally when you are seeking a response on a specific level of analysis. People may also answer according to what they think you want to hear. They may answer according to their public profile rather than the underlying corporate reality.” (Naoum, 2007)

“No control over respondants. This means that although you state in your questionnaire that a particular person should complete the questionnaire (such as marketing director, managing director or the site agent), there is no guarantee that this statement will ensure that the right person completed the questionnaire. However, this is less of a problem than not getting a response at all, given the fact that response rates for postal surveys usually range between 40 and 60 percent.” (Naoum, 2007)

“Industry fatigue. Companies receive a steady stream of questionnaires and pressures of modern business mean that for many organisations and individuals, students’ questionnaires are of less priority.” (Naoum, 2007)

Personal interview

“The personal interview is another major technique for collecting factual information as well as opinions. It is a face-to-face interpersonal role situation in which an interviewer asks respondants questions designed to elicit answers pertinent to the research hypothesis.” (Naoum, 2007)

Using the interview technique can sometimes only be suitable if it is undertaken under certain circumstances, for example, knowing the interviewee so that you know only to ask what is important and how to ask it. Also interviewing people with the same characteristics, so that they are both looking at the question from the same perspective. Performing an interview is also essential if the questions need to be explained or described, as well as being able to probe the answers given by each correspondent, as to why that response was given or feel the way they do about a specific aspect.

As with the questionnaire technique, they are some variables that need to be considered, as to the structure of the interview as these can take three forms, namely unstructured, structured or semi-structured. However, this does not mean that only one form needs to be utilised, as the interview can be a combination of all three.

Unstructured interview

“This form of interview uses ‘open-ended’ or ‘open’ questions and the questionnaire is often pitched at a very general level so that the researcher can see in what direction the interviewee takes things in their response. It is usually conducted with qualitative research. Unstructured interviews can also be conducted at the beginning of any research (also known as exploratory interviews) when the researcher knows little about his/her subject area.” (Naoum, 2007)

Semi-structures interview

“This is more formal than the unstructured interview in that there are a number of specific topics around which to build the interview. This form of interview uses ‘open’ and ‘closed-ended’ questioning but the questions are not asked in a specific order and no schedule is used. Your task is to discover as much as possible about the specific issues related to your subject area.” (Naoum, 2007)

There are four characteristics of a semi-structured interview, as stated by Merton and Kendal (1946):

“It takes place with respondents known to have been involved in a particular experience.”

“It refers to situations that have been analysed prior to interview.”

“It proceeds on the basis of an interview guide specifying topics related to the research hypothesis.”

“It is focused on the respondents’ experiences regarding the situations under study.”

“Semi-structured interviews start by asking indirect questions in order to build up a rapport with the respondent and then explore the specific issues that the interviewer has in mind.” (Naoum, 2007)

Structured interview

“In the structured interview, questions are presented in the same order and with the same wording to all interviewees. The interviewer will have full control on the questionnaire throughout the entire process of the interview. In this technique the questioning may start with some ‘open’ questions, but will soon move towards a ‘closed’ question format.” (Naoum, 2007)

There are three main advantages of using the structured interview method, as it allows for more accurate answers, a higher response rate and the interviewee can be probed as to why they were gave the answers, they did.

Data Analysis

Once all data has been collated, the process of analyse all the information begins, and again this can be categorised into three forms of data analysis, namely exploratory, descriptive and inferential statistical methods of analysis.

Exploratory data analysis

“Exploratory research is a qualitative research and can be described as a social or organisational behaviour research which produces results that are not obtained by statistical procedures or other methods of quantification. This type of data analysis refers to research about people’s lives, their stories and behaviour, and it can also be used to examine organisations, relationships and social movements. Some of the data may be quantified afterwards, but the analysis is qualitative.” (Naoum, 2007)

This form of analysis, allows people to express there own views or opinions on a subject, and so is generally used to analyse the data from open-ended questions.

Furthermore, by using the exploratory form of data analysis, we are able to code, similar answers into categories and record the information obtained from carrying out questionnaires and interviews.

Descriptive statistics method

“The descriptive statistics method is the simplest method of analysis which provides a general overview of the results. It gives an idea of what is happening. The descriptive method will either analyse the responses in percentages (as in the case of a large sample) or will contain actual numbers (as in the case of a small sample).” (Naoum, 2007)

Descriptive statistics method can also be further categorised into three sections of frequency distribution, measurement of central tendency and measurement of dispersion.

“When summarising large amounts of raw data it is often useful to distribute the data into categories or classes and to determine the number of individuals or cases belonging to each category. This is called ‘category frequency’. It can be presented in the form of tabulation, a bar chart, a pie chart or a graph.” (Naoum, 2007)

“Measurement of central tendency. This type of analysis is applied when you have a group of data and you wish to find the most typical value for the group, or the score which all other scores are evenly clustered around. These statistics are known as the ‘mean’, the ‘median’ and the ‘mode’.” (Naoum, 2007)

“Many survey analyses entail the comparison of results for different parts of the sample, for example the proportion of traditional contracts that overrun on time with the proportion of design and build contracts that overrun on time. In this case one might carry out a statistical significance test of the difference between the proportions.” (Naoum, 2007)

References

Bouma G.D. & Atkinson G. B. J (1995), A Handbook of social science research, Oxford University Press, Oxford

Cresswell J. (1994), Research Design: Qualitative & Quantitative Approach, Sage, London.

King, M. (2009) speech to CBI Dinner at Nottingham, 20.01.2009, online at http://www.bankofendland.co.uk/publications/speeches/2009/speech372.pdf.

Naoum Dr S. G. (2007), Dissertation Research & Writing for Construction Students, Second Edition, Elsevier, Oxford.

Stanlake G.F & Grant S.J. (1995), Introductory Economics sixth Edition, Longman Group Ltd, London.

Stewart, J. (2009) partnership UK statement 2009 on investmesnt???

Stewart D. W. & Kamins M. A (1993), Secondary Research: Information Sources and Methods, Sage, London.

Skinner – strategy for national infrastructure 2010

Parahoo, K. (2006) “Literature reviews” from Parahoo, K., Nursing Research: Principles, process and issues. Pp. 121-147, Basingtoke: Palgrave

National Statistics Organisation – 0.4% GDP http://www.statistics.gov.uk/cci/nugget.asp?id=192