Preparing for resilience: analysing and treating risk

Resilience of infrastructure is moving up the policy agenda, according to a report published this year by the UK’s National Infrastructure Commission (NIC). The NIC considers resilience to be characterised by an ability to ‘Anticipate, Resist, Absorb, Recover, Adapt and Transform’. Dr Rupert Booth, Oxera Economic Adviser, examines the first element—‘Anticipate’. He considers the role of the economist in working with executives on the analysis and treatment of risk as the first step in creating a resilience strategy

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Social discount rates: inequality and the long term

The second article in this two-part series on Social Discount Rates (SDRs), as used in project and policy appraisal, discusses new evidence on how the rate at which the SDR declines could change, and how it could be adjusted to take inequality into account. Adjusting for inequality can reduce the discount rate even further than highlighted in our first article—to below 2%. The SDR could also decline more slowly than currently assumed. This would increase the benefit–cost ratio (BCR) of almost all projects seeking approval for government funding

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A formula for success: reviewing the social discount rate

The social discount rate (SDR) is a crucial component of the UK government’s approach to project and policy appraisal. Government guidance has stipulated the same SDR (3.5%) since 2003. In the first of two Agenda in focus articles, we show that recent research can reasonably support an SDR of under 2.5%; and that this SDR declines considerably more slowly as the appraisal period is extended than the one that is currently used

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Flying through the storm: aligning merger control and state support

Many firms are facing financial difficulty as a result of COVID-19, and are receiving state support. However, we have not (yet) seen the predicted increase in merger activity. Is it preferable to provide state aid to companies in order to allow them to continue operating, or should we allow these ‘failing or flailing’ firms to be acquired by others? Which is the right tool to use, and could there be more alignment between them?

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Decarbonising transport: a just transition?

In March, the UK Department for Transport (DfT) published ‘Decarbonising Transport: Setting the Challenge’, a policy paper outlining current and planned policies needed to decarbonise the UK’s domestic transport sector. We provide a commentary on some of the DfT’s strategic priorities—the shift to active and public transport, as well as the decarbonisation of the passenger vehicle fleet. We then discuss some of the wider social implications raised by the proposed measures

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Video (conferencing) killed the commuter star?

For many of us, workplace communication has moved online due to the coronavirus pandemic. What does this mean for traditional transport infrastructure that is geared towards enabling greater employment density? Have we reached peak agglomeration and, if so, what does this mean for investment priorities?

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Destination unknown: airport regulation in the wake of COVID-19

The COVID-19 pandemic has had a severe impact on public health, and significant and far-reaching effects across most sectors of the economy. Given the current global travel restrictions, with most of the world’s population living in countries with some form of travel ban or restriction, aviation has been one of the most dramatically affected sectors. What long-term effects will this have on the sector, and what are the implications for economic regulation?

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Five things to do with HS2

The UK government has given its Notice to Proceed with the first phase of a new high-speed, high-frequency railway line between north-east London and Birmingham. It has also updated the business case for this phase. Following Oxera’s work on the Oakervee Review—which led to the decision to go ahead with the line—we review the economic case, and recommend how the evidence base might be improved.

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Risky business: political uncertainty and the cost of capital for regulated firms

Statements by politicians about nationalising or intervening in the functioning of regulated industries have attracted substantial media attention in recent times, leading to an increase in political and regulatory risk for regulated industries. A case study focusing on National Grid, the energy transmission company in the UK, suggests that increased political and regulatory risk can affect the valuation of regulated utilities through a combination of lower expected cash flows and a higher cost of capital

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State aid spotlight on tax: the General Court’s judgments on Fiat and Starbucks

In 2015, the European Commission ordered Starbucks and Fiat to each pay €20m–€30m in the Netherlands and Luxembourg, respectively, as their tax arrangements were found to constitute illegal state aid. On 24 September 2019, the General Court upheld the Commission’s Fiat decision, but annulled the Starbucks decision. What were the key economic issues in these cases, and what are the implications of the judgments?

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State of play: what’s going to happen with UK freight after Brexit?

The Prime Minister of the UK, Boris Johnson, has pledged to deliver Brexit on 31 October 2019, without further delays, whether or not a deal is in place. Retailers and manufacturers are preparing their supply chains, with companies and organisations reviewing their distribution networks and, in many cases, stockpiling inputs. On 18 August, a UK government report on the detailed preparations and scenario modelling undertaken by HM Treasury was leaked to The Sunday Times. In this article, we review some likely sources of friction and delay and quantify the potential impact on supply chains.

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