Insight
100 days of Labour: funding uncertainty looms large for contractor concerns
24 Oct 2024
Gavin Mason
Operations Director
Capital spending increases and funding certainty must be prioritised by a government grappling to increase construction investment confidence. That is according to the results of a survey of industry leaders conducted by Pick Everard and planning and development consultancy Lichfields. Ahead of the Autumn Budget, respondents identified and reviewed key decisions undertaken in Labour’s first 100 days in power, as well as policy changes that can be enacted immediately to unlock growth, remove barriers and increase investment confidence.
Capital spending increases and funding certainty must be prioritised by a government grappling to increase construction investment confidence. That is according to the results of a survey of industry leaders conducted by multi-disciplinary consultancy Pick Everard and planning and development consultancy Lichfields.
Ahead of the Autumn Budget, respondents identified and reviewed key decisions undertaken in Labour’s first 100 days in power, as well as policy changes that can be enacted immediately to unlock growth, remove barriers and increase investment confidence.
Overall, 74% of respondents stated that gloomy rhetoric ahead of the Autumn Budget had increased market uncertainty, while the same number agreed that a change in government hadn’t increased appetite among the construction industry to increase investment spend.
Also challenged by respondents was Labour’s proposed industrial strategy, with funding certainty for committed schemes, such as its 2030 clean energy programme, topping construction industry concerns (76%).
“Recent industry casualties do bring into sharp focus how realistic the government’s plan to expand housing and infrastructure construction is, especially with viability appraisals already so challenging in a changeable interest rate environment.
“Such collapses also draw attention to the ability of construction companies to trade through many years of poor underlying performance by expanding their turnover. Fundamentally this is an unstable way to manage the delivery of projects, train the necessary people to deliver the work, and control the cost of projects.
“The solution, rather than adding too much additional government bureaucracy, will lie within the clients, professional teams and auditors with the right skills. Getting these partners to identify and reward well run businesses with repeat work, rather than downplaying the risks and contracting on the basis of artificially low pricing."
— Gavin Mason, operations director at Pick Everard
Elsewhere within the survey, interest rate cuts were under the microscope, with the sector initially displaying some optimism around borrowing potential back in August. However, 62% of contractors and consultants stated that the shift hadn’t resulted in delivering attractive finance options in the market.
Policymaking decisions, including the status of the Biodiversity Net Gain legislation, also topped the wish list of priorities for Labour’s next 100 days in charge (68%), with Labour yet to deliver any decisive update since the scheme’s introduction in February.
However, despite a bleak consensus on investment prospects, increased housing targets (42%) and more intervention in planning decisions (52%) was stated to have increased confidence levels somewhat over the past 100 days among construction industry professionals.
“There are signs that new government policy is giving greater confidence to the market, particularly in relation to planning decisions and the proposed imposition of mandatory housing targets, which could be a game-changer.
“But the new administration has also been striking a very cautious tone regarding the state of the public finances and the bandwidth for future spending commitments, and this has created uncertainty which looms large across the sector. All the while, the downward path for interest rates currently looks set to be fairly gradual.“In terms of the next 100 days, the sector believes the government must urgently provide greater clarity on future capital spending and continue to focus on policy decisions, such as the Building Safety Act and adopting the new National Planning Policy Framework, to really catalyse investment activity. This will be critical to kick-start economic growth into 2025.”
— Ciaran Gunne-Jones, senior director, head of economics at Lichfields
The results of the survey echo similar concerns portrayed by the construction industry earlier this year, when Pick Everard and Lichfields revealed that pre-election, 83% of respondents thought that policy and/or economic uncertainty was a major investment stumbling block.