Labour should place construction at the heart of its growth agenda

With just over two weeks to go, nervousness has set in among business leaders ahead of the Budget. Rumours have swirled for weeks about the tax and spend decisions that will be announced on 30 October, as the new Labour government has spent much of its first 100 days dampening any raised hopes by repeating its claim that it has to fill a £22bn “black hole” in the public purse.

Ruling out raising taxes on “working people” means the burden has to fall elsewhere, namely on businesses. Capital gains tax and employer contributions to National Insurance are the two main areas for concern, while the chancellor is also expected to reform the fiscal rules she inherited, potentially freeing up as much as £57bn for infrastructure investment, according to the Institute for Public Policy Research.

The exact policy levers and pain points we will not know until Budget day. What we do know is that in an attempt to inject some positivity into what has become a wet and rather miserable October the government hosted its glitzy International Investment Summit in London this week. Elton John and King Charles aside, the focus was very deliberately on growth.

The prime minister and chancellor used their speeches to hammer home the message that Labour’s number one priority is economic growth, because without it none of its other ambitions will be possible. That is a message business – and in particular construction – can get behind.

Clearly public money cannot do all the heavy lifting, which is why the government spent a whole day drawing attention to a raft of private sector investment announcements. Not all of this investment was new. As with so many carefully choreographed government events, previous deals were bundled up with the “new news” so that it all adds up to the headline £63bn figure. Nevertheless the emphasis on leveraging the private sector makes sense and few would argue with the positive noises the summit generated.

Good intentions and the rhetoric of Britain being “open for business once again” only go so far. Many in the business world are impatient for action

The headline projects covered data centres, carbon capture, clean energy and infrastructure, while there was also news of public sector investment in the form of the National Wealth Fund which is merging with the previous government’s UK Infrastructure Bank. Its purpose is to use £27bn of public money as a catalyst for private investment into growth, though it has been pointed out this is actually less money that Labour first proposed.

Perhaps even more welcome is the proposed industrial strategy – something construction leaders have repeatedly said is essential in creating a long-term plan growth. Out for a six-week consultation, Invest 2035 provides a 10-year route map and very much underpins the Labour message that it wants private investors to hear: its mission is to provide political and economic stability to inspire investor confidence in the UK.

>> Also read: Market forecast: Demand is set to rise as the economy stabilises

Where industry bosses might have a bone to pick with the proposed strategy is in not naming construction as one of its “growth-driving sectors”. That title is given to advanced manufacturing, clean energy industries, creative industries, defence, digital and technologies, financial services, life sciences and professional and business services. Arguably you could say construction fits within or overlaps some of these sectors, it certainly is an enabler to them all. And looking ahead, we are promised specific ”sector plans” when the strategy is finalised, alongside the spring spending review.

The summit also zoomed in on the issue of regulation, with Starmer sounding more like a Conservative leader than a Labour one when he said: “We will rip out the bureaucracy that blocks investment.”

He added: “Where it is needlessly holding back the investment we need to take our country forward, where it is stopping us building the homes, the data centres, the warehouses, grid connectors, roads, trainlines, then mark my words – we will get rid of it.”

Many commentators summing up the mood of the summit described it as positive, but then came the caveats. Good intentions and the rhetoric of Britain being “open for business once again” only go so far. Many in the business world are impatient for action.

Mark Reynolds, Mace CEO and Construction Leadership Council co-chair, has made clear his frustration with the impact that the delays to planning reform and the uncertainty around the Budget is having on construction firms. Talking to the Telegraph this week he pointed out that many construction firms are doing the very opposite of investing: they are cutting costs, not purchasing plant and equipment, not taking on new projects, not hiring more people. It is the smaller construction firms that typically directly employ workers and so will be most anxious about the impact of a National Insurance hike.

True, the most recent construction output figures have been positive, showing 1% increase in the three months to August, while the Purchasing Managers’ Index clocked in a seventh successive month of growth. Aecom’s market forecast says demand is set to increase thanks to more economic stability, but – and this is the clincher – it says there may not be capacity in the sector to meet demand. Risk aversion in construction is an understandable reaction in the face of financial pressures that have hit the industry hard in recent years and, let us not forget, resulted in many company collapses.

For construction businesses to start to invest again, they need to see a secure pipeline of projects coming through and they need clarity from government on its tax and spend plans. Budget day cannot come soon enough.

Chloë McCulloch is the editor of Building