Posted by Catherine Welch, Partner
Budget uncertainty paves the way for construction investment delay
At this stage before a budget, we normally have a fair idea of what might be in store. Bearing in mind the unexpected recent resignation of the Chancellor just weeks beforehand, the impact of the Heathrow ruling on the government publishing the National Infrastructure Strategy, and the unpredictable economic outlook following fears of the spread of coronavirus, this is not an ordinary time for a budget.
Where does this leave the construction industry? Sajid Javid promised an “infrastructure revolution”, and the government says it plans to invest £100 billion in infrastructure. There is to be a new infrastructure strategy and new construction strategy, which we would expect to be ambitious, but will they address critical issues, such as the skills gap and levelling up of regional inequalities?
With the green light for HS2, this may indicate the government’s intention to push ahead with its promised investment in infrastructure projects. With so many infrastructure demands identified for support, will the spend be spread too thinly?
Following reports this morning of the Treasury briefing the BBC that the government will not now publish its National Infrastructure Strategy with the budget statement next week, it seems the Heathrow ruling by the Court of Appeal is forcing the government to re-evaluate if any other planned national infrastructure projects contravene the government’s climate change commitments.
When the National Infrastructure Strategy is finally published, it will also need to address the skills gap shortage in the construction industry, and include revitalised commitments to vocational education and apprenticeships. In light of the government’s new immigration policy, the Strategy will also need to address shortages of unskilled workers for the industry, given its heavy reliance on labour from abroad. Ultimately, businesses need to be able to attain staff at all levels without delays and red tape.
The headlines have focused on major infrastructure projects, but this is also an opportunity to deal with other challenges in the industry, for example potholes (which some economical analysis has suggested provides better economic benefit returns than some major infrastructure projects). The government has already indicated support for repairs to roads and potholes, announcing this week that 32 councils will receive a share of a £93m fund dedicated to addressing the pothole issue. Hopefully the budget will provide for further programmes at a regional and local level targeting this side of infrastructure too, which will help regional supply chains. This is particularly pertinent for local economies, when the supply chain contracts for many major UK projects are often awarded to international companies.
The replacement Chancellor, Rishi Sunak, tweeted the budget “will deliver on the promises we made to the British people – levelling up and unleashing the country’s potential”, suggesting the government intends to take positive steps to address regional inequalities.
Amid fears the Coronavirus may trigger a global economic downturn, we will be ‘watching this space’ to see if next week’s budget will be a ‘Plan B’ budget. In light of the current shadow of the Heathrow court ruling, and Coronavirus concerns, it seems likely the government will delay their announcements on certain important infrastructure issues until the autumn budget, when the impact of some of the related environmental and political risks may be clearer.
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