September 15, 2017
Interviewed by: Privcap
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The Middle-Market Is Bullish on Infrastructure

RSM’s Chief Economist surveys the promising future of modern infrastructure, and the setting of the stage for future investments.

RSM’s Chief Economist surveys the promising future of modern infrastructure, and the setting of the stage for future investments.

The Middle-Market Is Bullish on Infrastructure

Joe Brusuelas, RSM:

In this quarter, we wanted to get a sense of the enthusiasm, or lack thereof, with respect to the middle-market as it pertains to a federally-led infrastructure project.

Did our clients feel that it would provide a significant opportunity for their business organizations? Then, which areas of infrastructure building in particular might lead to a positive action on the part of middle-market and our middle-market clients?

The results were pretty encouraging: 59% of all respondents indicated that they thought a federally led infrastructure project would result in significant opportunities for their firms.

Privcap: You distinguish between “little i” and “big I” infrastructure assets. Please explain. 

Brusuelas: When we talk about “little i,” we’re talking about the things you’d normally think about: bridges, roads, ports, water viaducts, sewage, water substructure, bus lanes, bicycle paths.

Now, with respect to “big I”, this would be the infrastructure that would support our modern, new economy. Think telecommunication, such as embedding 5G networks into the road network so that we can eventually have autonomous driving vehicles. Installing 5G around the country in modern broadband, so we have a fully connected, modern economy that’s able to work from anywhere in the world. Or you might be thinking about broader energy products, creating a North American energy infrastructure.

This new economy that is springing up around telecom, biotech, life sciences and technology defined broadly is really setting the stage for where I think our clients are going to take their firms.

In terms of telecommunications, in terms of access and speed—think broadband—70% said they would be interested in bidding on projects that respond to telecommunications or network security. Think cybersecurity.

In addition, a full 65% of overall respondents indicated that they’d be interested in bidding on projects associated with building out the infrastructure, organized around the energy grid, which of course is a very good, forward-looking thing if you take a step back and think about where the middle-market is and where it is likely to go.

Why focus on federally-led infrastructure investing? 

Brusuelas: When one takes a step back and looks at infrastructure, what one tends to see is that it only gets built if it’s federally-led. Many of the experiences in terms of the projects we’ve had over the last 30 years with respect to private sector led projects haven’t gone so well. Many resulted in bankruptcies.

What are some examples of infrastructure assets that need to be improved and modernized?

Brusuelas: With respect to energy, the steps that were taken in early 2017 to begin to deregulate energy markets really unleashed quite a bit of private sector investment. The jumpstart on complete, already-existing pipeline projects specifically dedicated to oil and natural gas. With respect to broadband and 5G, that’s probably going to take a bit of government incentives via subsidies to jumpstart those very expensive projects that will take quite a long time to complete.

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