The UK’s world-beating builders are struggling at home
An industry that is one of the country’s greatest prides needs support and certainty to flourish.
Construction employs hundreds of thousands of people in every region of the country, 1.5 million more than the automotive sector does, and directly contributes seven-and-a-half times more to the UK economy. It operates in a high-cyclical environment that is particularly reliant on investor confidence for growth.
As such, if the wider economy is suffering, construction is one of the first places where the stress and strain begins to appear. In an industry like ours, a slowdown can have a devastating effect that reaches all the way down the supply chain.
Politicians often incorrectly confuse volume housebuilders, making large profits and paying excessive executive salaries, with the construction industry as a whole. Two thirds of the industry is actually nothing to do with housing, but works on slim margins in order to deliver schools, roads, hospitals and essential infrastructure to keep the lights on and the water flowing.
SMEs also make up a huge proportion of our sector, and by their nature those businesses are highly reliant on cash flow. If one client on one project stops paying, it doesn’t take much for a small contractor employing 100 people to start feeling the pinch.
The latest data from our sector show that history may be on the verge of repeating itself.
The number of firms facing severe financial distress has jumped this quarter. Across the industry – from planners and architects, as well as our suppliers – we’re beginning to hear genuine concern about the future. This hopefully will attract the attention of politicians all too consumed with the general election campaign.
Construction and infrastructure delivery is one of the UK’s great talents, envied and exported around the world. From Dubai to Delhi, programmes and building projects are kept on track by exported British expertise – but at home the industry is beginning to suffer under the strain of wider economic issues.
That’s why earlier this week we released our “Manifesto for Construction and the Built Environment” in the hope that future governments will give our industry the support it needs.
Construction relies on certainty and planning. Building a new power station or a railway line is a hugely complex logistical task, relying on thousands of individual companies from across the world, delivering labour, parts and services in a precisely coordinated clockwork of activity.
With the lack of clarity about Brexit affecting the private sector, particularly, commercial and residential property markets, investor and lender confidence is at levels equivalent to the crash in 2008.
We also now face doubt for the delivery of some of our largest infrastructure programmes, with political support for projects like HS2, Crossrail 2 and the Heathrow third runway being questioned.
On top of that, the whole industry has now steeled itself twice for the possible impact of a no-deal Brexit, reserving warehouse space, developing contingency plans and stress testing project delivery – only for nothing to happen and a continuing lack of clarity to descend once again.
Regardless of wider Brexit and general election manoeuvring, what we need from our Government is a pledge to provide us with more certainty and fairness.
That means a clear commitment to funding and delivering the UK’s infrastructure pipeline as recommended by the National Infrastructure Assessment. It also means clarity over our future access to European and global labour markets, fair share of risk in contracts and confidence that the Government is going to deliver on pledges to invest in innovation on public sector projects.
We also want to see the creation of a Department for Growth to break down the silos in Whitehall and make more effective and quicker decisions so that we can get on with delivering growth-boosting projects. There is also a pressing need to plug the low-carbon skills gap if the country is to deliver on the ambitious net-zero carbon plans put forward by many of the political parties.
For the industry, it means we need to be ready to work together more collaboratively across the supply chain to ensure we can continue delivering productive projects as the wider economic trends become hard to predict.
Difficult economic times tend to lead to a resurgence in outdated and adversarial business practices across our industry that benefit no one. We must not return to the bad old days.
I hope that in a few weeks’ time, we’ll know more about the future direction of our country and that our future trading relationship with the EU will become clearer so that the sector will stop feeling so much of the strain.
I’m optimistic – but the industry must be recognised for its contribution to our nation.
This article was originally published in The Telegraph