General election ‘24: What does it hold for the construction sector?

Friday June 28, 2024

What construction firms will be looking for in the manifestos

After weathering months of fierce economic headwinds, UK construction is starting to see the benefits of more stable, favourable conditions.

Input cost inflation is slowing, even if marginally, while new business pipelines are strengthening. The industry will be hoping that the election delivers the support that it needs to capitalise on new opportunities and bolster its resilience.

What will firms be looking for, and what are the main parties pledging to deliver?

Building skills

Earlier this year, before the election was called, we asked decisionmakers at construction businesses across the country what they wanted to see the government prioritise to support their future prospects as part of our latest construction report.

Their responses reflect what they’ll likely still be hoping for from any new government taking power from July.

One issue at the top of the list is a focus on skills development. All three main parties have committed to improving skills generally – from the Conservatives’ plans to create 100,000 new apprenticeships by 2029, to Labour’s plans to create a ‘Skills England’ body and the Liberal Democrats’ proposal for new ‘Lifelong Skills Grants’.

But alongside this, Labour and the Liberal Democrats have pledged construction-specific measures, with the former promising a workforce and training plan for construction, and the latter offering investment in construction skills and training.

Firms will no doubt welcome the fact that their specific needs have been recognised. But – as always – they’ll be keen to scrutinise the detail on how this will be delivered, and hopeful that they’ll have a say in what training would be most beneficial.

They’ll also want to know that any support will be implemented quickly. Along with fundamental labour shortfalls, industry leaders have been warning of skills shortages for years, and deficits are now affecting the capability to deliver projects as well as holding back the country’s capabilities in crucial areas like the adoption of new digital technologies, decarbonisation and the delivery of major infrastructure projects.

A blueprint for growth

Another common ask was clarity on central industrial and energy policy.

Both Labour and the Liberal Democrats have committed to new industrial strategies, with Labour also pledging to deliver a ten-year infrastructure plan.

While the Conservatives haven’t set out a fresh blueprint, they have recommitted to spending £36 billion of HS2 savings on transport projects across the North of England and the Midlands, and earmarked £6.5 billion for transport across the country.

The lack of a clear, trusted, strategy can hold back decision making and result in ‘stop-start’ pipelines of work, particularly in areas like large-scale infrastructure. This in turn exacerbates problems like skills shortages as talent leaves the market in between jobs in search of more opportunity and consistency elsewhere; something the UK’s construction sector is already experiencing first-hand.

A good, solid, plan – in contrast – makes it easier for businesses to secure fresh backing, invest in their operations, and anticipate and manage risks.

Generating pipelines

Alongside training and strategy, the sector will also be looking for measures that deliver new work.

Investment in housebuilding – something one in six (15%) of those we polled said they wanted a government to prioritise – is an area where every party has made a pledge. These pledges have however, been made without much detail on how they’re going to be met – something I highlight in my video on construction and the election.

The Conservatives have promised 1.6 million new homes within the next Parliament, while Labour has said it will deliver 1.5 million, and restore mandatory housing targets – something that could lead to poor development behaviours, such as a disconnect between developments and necessary associated infrastructure. The Liberal Democrats have promised 380,000 new dwellings a year, through ten new ‘garden cities’.

Construction activity is also set to be supported through planning reform. Both the Conservatives and Labour will fast-track planning applications for urban brownfield sites, while the Conservatives are aiming to reduce the average time to approve major infrastructure projects from four years to one.

Again, the efficacy of this will be determined by the detail, when it is published. As other commentators have also noted, proposals to develop brownfield sites may need to be accompanied by additional incentives or concessions to account for the potentially higher-cost of re-developing them compared to more traditional projects – something the Liberal Democrats have said they would deliver.

This could include a focus at a community level on striking fair Section 106 or Section 75 agreements – legislation that 35% and 34% of respondents, respectively, said would already negatively impact their ability to progress projects this year.

Missing foundations?

Two elements that businesses may feel is missing from the manifestos are more direct support for decarbonisation efforts and help with the digitalisation of the sector.

Tax credits for ‘green’ plant was something that a further one in six (15%) construction decisionmakers told us they wanted to see prioritised, but absent from any major party’s plans.

The same proportion said they would welcome new or greater investment in digitalisation, including AI. While the Conservatives have pledged to increase public spending on R&D (likely to include AI research) and Labour has said its industrial strategy will support the development of the AI sector, only the Liberal Democrats have specifically said they would help the sector with technology investment – although exactly how this would be delivered is unclear.

Next steps

Regardless of who enters power, one thing we can count on the election bringing is more political certainty. This is something that just over three-quarters (76%) of the decisionmakers that we interviewed for our report said was causing them to delay investment, or their clients to delay commissioning new work.

Firms will be hoping that this isn’t the only benefit, however, and that they’ll see clear policies and clear thinking on the issues that matter the most. This is a sector that’s ready to dig deep to make the most of whatever lies ahead, and where clear, well-considered support can really help it build to new heights.


Related team

Justin Matthews

Justin Matthews

Justin Matthews

  • Partner
  • Financial Advisory
  • London