News & Events

3rd June 2015

Impact of the Election on the Construction Industry

According to government figures, the construction industry contributes almost 90 billion pounds to the UK economy and consists of over 280,000 businesses covering around 3 million jobs, which is equivalent to about 10 per cent of total UK employment. By 2025, the sector's output is expected to increase by more than 70 per cent.

Impact of the Election on the Construction Industry

Britain’s construction sector showed signs of slowing down last month as uncertainty over the results of the general election led developers to be more cautious over their spending decisions. The UK construction purchasing managers’ index (PMI) dropped to 54.2 in April from 57.8 in March, although still above the 50 mark that indicates growth.

On Wednesday 27th May, after the UK voted the Conservatives into government, in her speech to the House of Lords, Her Majesty the Queen set out the government’s plans aiming to “legislate in the interests of everyone in our country” and revive the construction industry with Cities and Local Government Devolution, Housing, Enterprise and the High Speed Rail (HS2) Bills.

The government’s priority is to address the chronic under-supply of new homes. According to the study by the Federation of Master Builders (FMB), 200,000 starter homes are needed annually to meet the rising demand of the housing market, however the construction industry remains sceptical claiming that the project “won’t get off the ground unless the government tackles the construction skills crisis.”

In response to the shortage of skills, the government is planning to create three million apprenticeships in the next five years. Nick Baveystock, Director of The Institution of Civil Engineers (ICE), believes that the creation of this level of apprenticeships “can only help the economic wellbeing” and the plan for improving skills in the industry should be a matter of urgency if housing targets are to be met.  

Furthermore, the Government’s commitment to provide for the devolution of power to city regions to boost local growth in England has been welcomed across the construction and property industry. The Cities and Local Government Devolution Bill is a long-term strategy to empower towns and counties to take responsibility for issues like transport, housing, skills, health and social care. Melanie Leech, Chief Executive of The British Property Federation (BPF), said: “The announcement of the Cities and Local Government Devolution Bill is a welcome step forwards, and is something that holds enormous potential … for the creation of jobs, homes and infrastructure. We urge the Government to allow all areas of the UK, not just those with a Mayor, to be able to benefit from these new, devolved powers.”

Added to this, the plans for high-speed rail links were reaffirmed during the speech which will help rebalance the UK economy and bring greater prosperity to the Midlands and the North. The project will also free up space on our crowded rail network, improving connectivity between London, the Midlands, the North and Scotland. It would promote regeneration, boost local skills and generate tens of thousands of jobs, helping secure the UK’s future prosperity.

As a part of new Enterprise Bill, government is planning to cut red tape by at least £10 billion by 2020 and set up the Small Business Conciliation Service, all of which will help small businesses in construction and other industries. Sarah McMonagle, Head of External Affairs at the Federation of Master Builders (FMB), said: “Poor payment practices have plagued the construction industry for too long and we’re hopeful that widening the powers for representative bodies to act on behalf of their members to challenge grossly unfair payment terms will go some way to address this.”

The government committing to the number of apprenticeships and policies represents a significant shift in the right direction and will undoubtedly help the industry regain confidence and start investing. Melanie Leech, Chief Executive of the British Property Federation, said: “We would like to see the government prioritise a coherent plan to deliver increased housing supply; to follow through on the commitment to fundamentally review business rates, and take action to put in place the right infrastructure – including real estate – that will allow our country to thrive.”

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