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The ICE’s State of the Nation: Infrastructure in 2026 – published today, 5 March, and drawing on insights from expert panels across transport, energy, water and a range of industry interviews – covers critical topics impacting the sector.

The asset health crisis remains a high priority among these, while other compounding factors from skills and capacity challenges to cost efficiencies, materials supply, decarbonisation, re-thinking investment and data usage and protocols are also encompassed.

The headline messages are as follows:

• More collaboration is required if we are to meet the challenge. Greater success will be achieved when organisations work well together within contractual environments that encourage this.
• Large-scale innovation is crucial. This must involve the rapid uptake of non-traditional solutions spanning investment, procurement and technology.
• The industry must urgently build its capacity and capability, with a large and sustained recruitment and training programme and more efficient ways of working to make the most of existing resources.

Daunting challenge

ICE president David Porter set a challenging tone for the industry in his opening remarks for the report, describing the aim of the government’s 10 Year Strategy for UK infrastructure as “to meet some of the biggest challenges facing the country – for instance, boosting climate resilience, improving social inclusion and making a clean energy transition.”

The UK Infrastructure Pipeline – a list of priority projects for which there’s a proven need – “give the construction industry a clearer view of its upcoming workload than it’s had for many years,” Porter states.

“While that’s hugely welcome, it also presents some challenges. With the strategy indicating a 50% increase on public infrastructure spending in 2015-25, there’s so much to do by 2035. Can the supply chain increase its productivity, work smarter and boost its capacity sufficiently to deliver everything being asked of it?”

Asset deterioration

The report notes that, while many organisations are focused on the capital programme ahead, asset management “remains a serious challenge”.

“In several areas, particularly the council-run roads network and water sector, the deterioration of ageing assets is jeopardising operational continuity and even public safety. Deferring investment in asset management is a false economy, interviewees warned. The bill for replacement will far exceed that for effective maintenance – and it’s rising fast.”

Findings in the 2026 report amplify those reported las year: “Many organisations have entered an asset management emergency. They’re heading towards the point at which dramatic changes in condition, performance and remedial cost are inevitable,” it states.

Transport

The accelerating decline of transport assets nationwide – particularly local roads – is raising serious safety concerns, the report notes, while the cost of bringing the local road network back up to standard has been estimated at £50bn.

The report notes that this maintenance backlog can be tackled only by making improvements in key areas:

Regarding funding and planning, the report notes that short-termism of budget allocations “makes strategic asset management nigh-on impossible” and recommends that a minimum five-year funding cycle with a planning horizon of at least a decade would enable a risk-based, prioritised approach, giving better value for money in the longer term.

“Also, funds are allocated based on road length, regardless of intensity of use and environmental factors,” it goes on. “Many engineers would like to see the return of condition-based allocations, which were used until 2019.”

The ICE also sends a warning about standards, saying that transport authorities nationwide are using different recording and scoring systems in various combinations. A more uniform approach would improve visibility of maintenance issues and help engineers to form a shared understanding of these.

Experts also noted that the Design Manual for Roads and Bridges, the UK’s primary set of technical standards and guidance, is geared towards the strategic road network rather than local highways.

The report adds that beyond the local authority roads network, the declining condition of infrastructure assets is a growing challenge for National Highways, Network Rail and major airports.

It goes on to state that a growing culture of secrecy threatens to further destabilise fit-for-purpose transport, citing “a widespread fear of exposing just how grave the situation is becoming.”

“It’s a dangerous yet largely hidden problem. The organisations concerned and the government must recognise the safety risk and find the resources to tackle it effectively.”

Contributors to State of the Nation suggested that local authorities should collaborate to aggregate demand on transport infrastructure schemes, a move also recommended by the Local Government Association (LGA) in a 2025 update to its national procurement strategy.

The association argues that collective procurement can unlock economies of scale, reduce duplication and strengthen supplier relationships. By cooperating, councils can align technical standards and contract terms, making it easier for suppliers to bid and deliver consistently. This reduces the inefficiencies caused where each authority operates a separate framework with different criteria.

Collective procurement is framed as a way to stimulate innovation and give suppliers confidence to invest in capacity. Larger, aggregated contracts are seen as more attractive to the market, encouraging strategic partnerships rather than transactional relationships.

Energy

The State of the Nation notes the seismic shifts being rolled out across the energy sector and the “complexity of the diverse efforts to future-proof national energy infrastructure”, again pointing to the need for effective collaboration and citing Sizewell C as an example.

Sizewell C appointed contractors Balfour Beatty, Bouygues and Laing O’Rourke – known collectively as the Civil Works Alliance – in June 2025 and is applying an Australian alliancing model that has proved effective on complex, high-risk projects including the Sydney Metro.

This model is characterised by: an integrated team structure – the client, designer and constructor form a coalition with a no-blame culture; sharing of risks and rewards among all parties; financial transparency; governance is collaborative, with unanimity required when key choices must be made; the scheme uses a “best for project” ethos. The alliance prioritises successful outcomes over individual interests.

The plan is to maximise the use of offsite construction to make the project more efficient than Hinkley C.

Water

The report notes that in the water sector, the Cunliffe review focused on asset health, while Ofwat’s asset health roadmap is due to publish initial findings on potential extra maintenance funding in December 2026. This is encouraging water companies to gather more data on current asset health to inform future investment plans.

Beyond existing asset health, the report cites water insecurity as “a genuine possibility” and notes that reservoir-building has restarted in earnest, with other supply-boosting schemes mooted.

“Transformation in the water sector involves creating nine large reservoirs – the first for 35 years – and several inter-catchment transfer pipelines. That’s on top of approved business-as-usual spending in Ofwat’s current regulatory period (2025-30) on tasks such as cutting leakage. This will be almost double the equivalent outlay in 2020-25.”

The sheer scale or work to be undertaken across the sector is also compounded by what the report describes as “the UK’s lack of senior-level dam engineering expertise”.

There has been useful dialogue across the sector about ways through this challenge, including design innovation, common approaches and best practice.

However interviewees for the report also voiced concern about the apparent lack of coordination in terms of scheduling various big projects as they get started.

“Suppliers said that clients will get the best from them only if they work together to minimise the number of overlapping activities,” ICE reports.

Materials, skills and coordination

With the UK importing more than two-thirds of the steel used in construction and about a quarter of the cement, rising demand is extending and entrenching a global supply chain, which will impact rising transport-related CO₂ emissions, the report states.

Clients and consultants interviewed for State of the Nation indicated that pressure on materials as well as skills will be relieved by the wider adoption of Modern Methods of Construction (MMC), which includes techniques such as Design for Manufacture and Assembly (DfMA),  an engineering approach focusing on designing products for ease of manufacturing, entailing standardised componentry.

A more coordinated approach across projects can smooth demand and optimise resource utilisation.”

Meanwhile several contributors called for a systems approach to delivery that would take a regional view of projects. To this end, the National Infrastructure and Service Transformation Authority (Nista) is developing sectoral and regional spatial plans designed to help the government spot and resolve potential conflicts and highlight possible synergies.

Investment models

Funding infrastructure in the UK remains a challenge due to long-term underinvestment, a complex planning system along with economic factors such as interest rates and price inflation.

The report notes key moves to utilise private finance for infrastructure to overcome public sector budget constraints, citing projects including Thames Tideway Tunnel (pictured), the Lower Thames Crossing (LTC) and Sizewell C.

Tideway was a pilot project for the regulated asset base (RAB) model while Sizewell C and the LTC are showing how RAB can be significantly upscaled. Under this model, investors start seeing returns as soon as building phase starts. In the case of Tideway and Sizewell C, these come in the form of surcharges on consumers’ bills. The latter’s future consumers are paying a premium of £1 per month during its construction. In the LTC’s case, the government will repay investors in anticipation of future toll revenues.

Earning a return throughout construction rather than waiting for the asset to start working mitigates investment risk, meaning that investors provide capital at lower interest rates.

The report noted that public-private finance has shown some promise in Wales with a variant called the mutual investment model (MIM) introduced in 2017 on projects including the Heads of the Valleys Road dualling scheme (£550M). Separately, NCE recently reported on the teething problems and potential solutions of that scheme’s funding.

Another model put forward by the report is Land Value Capture (LVC)

“The obvious benefits of transport projects – e.g. improving links between areas of housing and centres of employment, retail and entertainment – create opportunities to negotiate investments from landowners and developers,” the report says.

“For instance, there’s a ‘zone of influence’ surrounding a new railway station that will increase the value of real estate within 1.5km of that asset.”

Digital technology and data

While strides have been taken in the use of data and artificial intelligence, the report notes: “There is widespread frustration at the lack of industry standards, common approaches or platforms for managing and sharing data.”

The broad view is that a unified, common approach to digitalisation and data-handling would benefit everyone – and that the government is best placed to lead on this.

“We’ve failed to tackle building-block issues such as data-sharing and interoperability. If we don’t deal with that, we won’t make headway,” warned another interviewee.

 

 

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