There can be no doubt that the construction industry has been hit hard by the current recession. Will the new UK Coalition Government help rebuild the construction industry or flatten it further?
The UK is in unfamiliar territory with a formal coalition between the Conservatives and the Liberal Democrats. The full implication of this coalition for the construction industry will take time to emerge. The planned emergency Budget, which it is proposed will be delivered on 22 June 2010, is set to make an interesting read. Tackling the current Budget deficit has been highlighted as the new Government’s most pressing priority.
The new UK Chancellor George Osborne has announced that £1.7bn of construction contracts across all UK sectors will be delayed or stopped as part of a pledge to achieve an overall £6.2bn of savings. Further cuts include £27m from the Olympics Delivery Agency and £150m from the last Government’s housing pledge.
In return however, £500m of the savings will be reinvested with £170m being spent on 4,000 social rented homes which will start on site this year; £50m will be spent on capital investment at further education colleges; and £150m will be used to fund 50,000 new apprentices in small and medium-sized enterprises.
The industry’s response to these proposals has on the whole been muted. The Chief Executive of the Construction Products Association has commented that the uncertainty in the new Government “could delay the investment decisions both in public and private sectors, and prolong the construction recession beyond 2010”. The Government has already announced that it will not support the proposed expansion of Heathrow and will block additional runway capacity at both Stansted and Gatwick. Adopting such a bold position at this embryonic stage of its term raises concern throughout the industry. With so many within the industry feeling the effects of the higher costs and decreasing workflow as a result of the recession, major capital spending cuts creates significant worries.
Deputy First Minister, Nicola Sturgeon has commented that Scotland is however, “leading the UK in facing up to the public funding challenges”. The Scottish Ministers have launched a new discussion document, Housing: Fresh Thinking, New Ideas which poses fundamental questions about the way houses can be built, allocated, funded and managed in the future. This is an attempt by the Scottish Government to make Scotland face up to the financial realities resulting from radical cuts in public spending.
In embracing current conditions, one thing both the UK and Scottish Government seem united on addressing is the reduction of carbon emissions. The coalition Government has launched the Green Deal Proposal which will give homeowners access to finance to make their homes more energy efficient.
Scotland has also recognised the need to achieve annual carbon reduction targets. Scottish Ministers have unveiled a Government-funded pilot project, the first of its kind in the UK, which will analyse thermal imaging scans of 10,000 homes across Scotland. The results are hoped to help tackle fuel poverty and reduce carbon emissions.
The Queen has recently outlined the new Government’s priorities for the coming year in the Queen’s Speech following the official state opening of Parliament. Within this it is stated that “Legislation will be introduced to improve energy efficiency in homes and businesses, to promote low carbon energy production and to secure energy supplies.” This will take the form of the Energy Security and Green Economy Bill. This is perhaps a positive sign for the future of the indusrty.
These concepts are by in large however, a drop in the ocean of the bigger issues currently facing the UK and indeed the Scottish construction industries. Lack of funds, increasing costs and uncertainty surrounding investment in the industry are but a few of the daily worries of developers and contractors alike.
The outlook for the construction industry therefore at best looks uncertain. The Queen has stated in her speech that the Financial Services Regulation Bill “will reform the framework for financial services regulation to learn from the financial crisis”. Let’s hope that these lessons have a positive impact on the construction industry but for the meantime, watch this space for whether the new coalition Government becomes a friend or a foe of this industry.