Scotsman legal review: Infrastructure

The Queensferry Crossing takes shape next to the Forth Road Bridge. Picture: Lisa Ferguson

There can be no doubt that 2015 has been a busy year for Scotland in terms of infrastructure projects. The Aberdeen Western Peripheral Route (AWPR) is making progress, as is the new Queensferry Crossing. The Borders Railway has seen unprecedented footfall since it opened in September.

Generally speaking, the lawyers behind Scottish infrastructure projects are feeling positive about the market and say Scotland is leading by example with countries such as Wales following suit.

Michael Watson is partner and head of the projects group at Pinsent Masons. He reports a busy year for infrastructure activity in spite of constraints as a result of accounting change.

As well as experiencing an active year in the renewables and offshore wind markets, Pinsent Masons has been involved in the Queensferry Crossing, which is a flagship project for Scotland.

“I think the general infrastructure environment in Scotland has been quite a positive place to be,” says Watson.

“There has been quite a lot of activity and it’s an attractive place for business from the rest of the UK to participate in.

“In the last six months or so there’s been a bit of a slow up. There have been a couple of financial constraints generally. There is less budget available for new projects and some existing projects.”

The fly in the ointment in what has been a mostly positive year is the ESA10 issue which has affected the balance sheet treatment of projects.

Likewise, an ongoing feeling of political uncertainty in Scotland may have made investors more cautious but there is still an appetite to get involved with infrastructure work.

“Infrastructure investors like stability,” says Watson. “In the UK, the uncertainty at the moment is whether we are going to be in or out of Europe. There is still some uncertainty about whether Scotland will become independent at some point.

“I have not really picked that up being a problem with investors. They just don’t like uncertainty because they don’t know what the economic environment will be.

“I think the big challenge that Scotland always faces is that it’s quite a small market so it does need to be more on the front foot than some of the bigger markets.”

Improving Scotland’s transport links has been the name of the game this year as the Scottish government responds to public demand by investing more in big projects such as the AWPR, the M8 and the Borders Railway.

“Within the transport sector there is a lot happening in Scotland and the market is strong and active,” says Eleanor Lane, partner at CMS specialising in the transport and infrastructure sector.

“I think there is a strong desire for good transport links in Scotland and I think it’s great to see that these projects are being brought to the market.

“The work that we did for Transport Scotland on transferring the Borders project to Network Rail, and then seeing the level of public interest in the railway now that it’s open, makes it very gratifying to have been involved in something that has been so well received.”

Michael Stoneham, finance partner in the infrastructure group at Brodies, says the Borders Railway has been a particularly interesting project to observe.

“Just about everyone has underestimated the popularity of that one,” says Stoneham.

“There is probably a case already for expanding the line. Much in the same way as the trams in Edinburgh. There is a pent-up demand for better transport.”

Brodies has seen a positive year with a lot of ongoing work which is set to continue into 2016.

“Our take on it would be that it’s been a very active year on the infrastructure side and it looks like it’s going to continue,” says Stoneham.

“We have been involved in a range of projects. One was the Royal Hospital for Sick Children in Edinburgh where we worked for the funders. That came through to a close this year and that was a good result.

“On transport we were advising Abellio in their successful bid for the ScotRail franchise. That has resulted in a new client with a major contract.

“We have been working for Scottish government along with Ryden and WSP in a joint project called Planning for Infrastructure.”

Stoneham says there is undoubtedly international competition for finance, especially across emerging countries in eastern Europe.

“Scotland does have the benefit of being a mature democracy,” he adds.

At Pinsent Masons, the focus has been on attracting foreign investment into the Scottish infrastructure market. Watson highlights Chinese investment as an area that a lot of people are interested in.

“We have been working closely with colleagues there to support the Scottish government initiative to raise the profile of Scotland as a place for the Chinese to invest,” Watson explains.

Other countries are now looking to Scotland as a guiding light on infrastructure projects.

“I know that Wales has been looking at the Scottish model with a view to following that,” says CMS’ Lane.

Stoneham agrees that the Welsh Assembly has been a frequent caller.

“They have now launched their own programme on transport and health which looks like it will be modelled on the Scottish one,” he says.

Watson also highlights the new City Deals which will bring Scottish cities in line with places like Manchester. In August last year, a £1.3 billion City Deal was signed for Glasgow which would fund major infrastructure projects and bring tens of thousands of new jobs to the city.

In August this year, Edinburgh and neighbouring local authorities submitted a bid to the UK and Scottish governments to secure £1bn of funding. Partners in the Lothians, Fife and the Borders said, like Glasgow, the money would create more jobs and improve infrastructure across the area.

“What City Deals shows is a very good process of working together by major Scottish cities plus the Scottish government,” says Stoneham.

“Scotland always has a good pipeline of projects. One of our predictions going forward is that the City Deals will make a big impact in the next year or so. Each of the cities has its own focus and it’s a really good collaborative effort.

“I don’t think they will have a problem finding investment.”

• The Scotsman’s annual review of the legal world looks at some of the most active areas of legal practice in Scotland. Informed by comprehensive data published by Chambers and Partners and Legal 500, the articles give exclusive insight into the work of the more than 11,000 practicing solicitors and 463 practicing advocates.