UK’s 10-Year Infrastructure Strategy

Introduction

In 2024, the UK government unveiled its 10-Year Infrastructure Strategy, a long-term plan designed to enhance national productivity, boost living standards, and support sustainable growth across all regions of the country (UK Government, 2024). The strategy addresses decades of underinvestment in infrastructure—such as transport, energy, housing, and digital networks—which have slowed economic growth and limited the efficiency of both public and private sectors. The plan emphasizes greater coordination between government and industry, long-term stability for investors, and improved delivery of key projects to strengthen the foundations of the UK economy.

The policy is a strong example of an interventionist supply-side policy, where the government directly invests in infrastructure to increase the productive capacity of the economy, enhance connectivity, and stimulate job creation and innovation.

Application to IB Economics

This case serves as a practical macroeconomic example of how governments use interventionist supply-side policies to shift the long-run aggregate supply (LRAS) curve to the right, leading to higher potential output and sustainable economic growth.

• Policy Effect on LRAS: By improving transport, energy, and digital infrastructure, the strategy lowers production costs, reduces delays, and improves efficiency. This shifts the LRAS curve rightward, reflecting a long-term increase in productive capacity.
• Productivity and Growth: Better infrastructure enhances the mobility of labour and goods, increases business efficiency, and raises labour productivity—a key driver of long-term growth and competitiveness.
• Job Creation and Regional Development: The plan aims to ‘level up’ the UK economy by connecting people to new employment opportunities, supporting housing developments, and promoting balanced regional growth.

In IB Paper 1 (15-mark) essays, this example can be used to discuss supply-side policies aimed at achieving economic growth, equity between regions, and improved efficiency. It also provides a contrast to market-based supply-side measures by showing how government-led intervention can address structural weaknesses in the economy.

Key Terms Explained

• Interventionist Supply-Side Policy: Government action involving direct investment in infrastructure, education, or healthcare to increase the economy’s productive potential.
• Infrastructure: The basic physical and organizational systems—such as transport, communication, and energy networks—necessary for an economy to function efficiently.
• Long-Run Aggregate Supply (LRAS): The total quantity of goods and services an economy can produce when all resources are fully employed; affected by productivity and resource availability.
• Productivity: The efficiency with which inputs (like labour and capital) are converted into outputs; a key determinant of long-run economic growth.
• Economic Growth: An increase in real GDP over time, resulting from higher output and improved efficiency.
• Government Intervention: Active involvement by the state to correct market failures or promote social and economic objectives.

The UK’s 10-Year Infrastructure Strategy demonstrates how public investment in infrastructure can act as a long-term catalyst for growth, improving productivity, reducing regional inequality, and strengthening the overall resilience of the economy.