In the wake of Boris Johnson’s election win, Ibrahim Imam, founder of PlanRadar, looks at five things the new prime minister needs to deliver for the construction industry
Many in the UK’s construction industry will have breathed a sigh of relief after the 2019 election. Years of uncertainty surrounding the UK’s leadership and its exit from the European Union has been enough to delay significant investment in infrastructure and threaten the future pipeline of projects in the UK.
The data shows output has slowed down and both the private and public sectors have pursued fewer projects. The construction industry is at a crucial juncture – and it needs more than stability.
Here are the five things Boris must deliver for the construction industry:
Fulfil his pre-election promises
There are never a shortage of infrastructure promises during an election campaign. However, in this Queen’s speech Boris promised to “implement the biggest infrastructure revolution in living memory”. A good place to start then would be seeing through the promises already made pre-election. This includes the £100bn “infrastructure revolution” promised for road and rail and even mega-investment into projects like the “Boris Bridges” that have been touted before.
There were also key promises made towards the NHS. The government has already pledged £2.7bn to build six new hospitals across England, but a total of 40 have been promised in the next 10 years. The previous Conservative chancellor scrapped PFI, so it isn’t clear what model this is being done under, nonetheless it was one of the most repeated promises in the campaign and more details about the process should be released.
Resolutions will also be needed for Heathrow Airport, where the Prime Minister once promised to lie down in front of the bulldozers to halt the creation of a new runway.
Railways such as HS2 and Crossrail can provide stimulus for economic growth, as well as other public benefits from projects like Thames Tideway. The PM should end the uncertainty over these projects and back the industry to deliver them.
No cap on construction workers
The phrase “Australian-style points system” reportedly performed well with electoral focus groups, but it’s difficult to see how it could work at all in construction. An exception for the industry is a necessity. Construction and migration have always been strongly linked and large construction sites tend to require a number of workers that local labour markets can rarely supply. Migration benefits both sides, as workers themselves must often move on to find work after completing a project too.
Foreign workers make up 15% of the construction industry’s workforce and more than half of that number are EU citizens. It’s believed 28% of construction workers in London have migrated from EU countries. Leaving the EU will strip these workers of their right to move freely to the United Kingdom for work. With the salary cap for tier 2 general work visas likely to be around £30,000, it’s not obvious how the situation of all these workers is going to be resolved.
The prime minister must guarantee key worker status criteria to tradespeople from the EU. These workers will be essential to delivering on the promised projects and achieving freedom of movement policy that supports the industry must be an absolute priority.
300,000 houses per annum
The National Audit Office says the previous government failed to build any of the 200,000 Starter Homes promised in 2015, despite election pledges to do so by the mid-2020s. The statutory framework for Starter Homes in the Housing & Planning Act, received Royal Assent back in 2016, but the £2.3bn budget has since been moved elsewhere.
The election result can offer the one thing the property market demands: certainty. The Conservatives must return to housebuilding. Boris has also promised to support the use of Modern Methods of Construction.
This is crucial: technology can keep costs down and increase productivity, government data shows that even growing productivity by 0.25% a year for 10 years would add £56bn to UK GDP. A proactive approach to housebuilding would reassure foreign investors and prevent them withdrawing their investments from the UK property market.
Clampdown on late payments
Late payments are harmful to both small and large businesses, but in construction, the issue is particularly important. Contractors must have money coming in to pay suppliers and subcontractors in the day-to-day running of the site. Bigger businesses with poor payment practices towards these can cause huge disruption to the pipeline. Federation of Small Businesses national chairman Mike Cherry said that late payments and poor practices lead “to the closure of 50,000 small businesses a year”.
Strengthening the power of the Small Business Commissioner, an independent public body set up in 2016, will help tackle this issue. Carillion’s cashflow was famously very low and it led to its liquidation in January 2018, with £7bn of liabilities and just £29m left in the bank.
Get a deal
Five major construction trade bodies: Build UK, Civil Engineering Contractors Association, the Construction Products Association, the Federation of Master Builders and the Association for Consultancy & Engineering wrote to Boris to warn him a no-deal Brexit could cost construction £12bn.
According to the government’s own figures, about two-thirds of all building materials are currently imported from Europe. Even a small increase in taxation or an introduction on tariffs could have a catastrophic knock-on effect for both small and large businesses. Particularly when parts of the industry are working within such tight profit margins, most suppliers and constructors simply don’t have the capacity to absorb these additional costs. A deal is essential to safeguard the future of the industry.
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