No great shakes

A distinctly chill wind could be felt in the latest construction activity figures released this week, as overall work in the sector dropped for the first time since August 2016. September’s fall, recorded by the respected IHS Markit/CIPS purchasing managers’ index, was prompted by the sharpest drop in civil engineering work for more than four years, together with a significant decline in commercial work. And in a warning which may well send a few more companies reaching for the blankets, respondents to the survey behind the data emphasised “fragile confidence” among clients, particularly in commercial building.

Statistics like these, of course, are only ever a fragment of a full picture; what seems like the start of a trend can just as easily turn out to be a blip. Nonetheless, the fact that work dropped in September – when it traditionally picks up after an August lull – and did so for the first time since the wave of uncertainty unleashed immediately after the Brexit vote, is cause for concern. Not just for construction firms, but also – given the pressing need for development in areas like infrastructure and housing – for the UK as a whole.

The country is in the grip of a housing crisis, and trying to stave off another over energy generation, at the same time as carrying out infrastructure improvements that are widely viewed as long-overdue for economic growth. So the government should be hyper-alert to drops in the industry’s work and to the reasons it is in the public sector’s interests to step in to plug those gaps. 

The fact that work dropped in September – when it traditionally picks up after an August lull – and did so for the first time since the wave of uncertainty unleashed immediately after the Brexit vote, is cause for concern

The Conservative Party conference, taking place in Manchester this week, provided a potential stage for the government to outline ways it could invest in construction to the economic and social benefit of the UK. However, the ploughing of a further £10bn into Help to Buy, while in itself welcomed by housebuilders, fell far short of the mark of a game-changer in housing; both from the perspective of developers hoping to see the policy extended beyond its current 2021 cut-off, and for critics, including housing associations, who believe the funding would have greater impact on the housing crisis if it were spent directly on more affordable homes.

Of more significance, potentially, is the government’s proposed new approach to working out the number of homes councils should build; an idea mooted in February’s housing white paper and quietly fleshed out last month. The method – which prioritises areas for building where homes are least affordable – would raise the number of new homes envisaged for England from 250,000 a year to 266,000, with the real significance being an increase of around 35% across 156 local authorities, particularly in the South-east.

Having a framework to ramp up the number of homes delivered in places close to London which have traditionally been resistant to development would be a powerful tool in addressing the housing crisis – even if the move has already drawn the ire of MPs in the Conservatives’ “shire” heartlands.

Sure, there are flaws with the proposals as they stand, but they are not much to do with the impact on the green belt: if councils can show there really is not enough unprotected land to build the levels suggested, the requirement for new homes can be reduced. A bigger issue, which has already been raised by northern councils, is that by calculating an area’s need for homes based on lack of affordability, places where houses cost less – for which, read the very places in the Midlands and North that are ripe for regeneration, development and investment – will see housing targets slashed.

There is a danger that infrastructure schemes are being allowed to stall – which would have clear consequences for wider investment in the regions many of those schemes are designed to benefit

Limiting growth in the UK’s regional economies is clearly the opposite of what the UK needs; the extent to which the economy is focused around the capital strikes at the core of the pressure on housing and infrastructure in the South-east. So the government needs to work up its new approach to housing alongside policies specifically designed to reignite momentum in regional development, particularly through drawing together infrastructure projects with wider development.

The £300m of funding announced at the Tory conference for rail connectivity in the northern England is a step in this direction. But as the fall in civils workload for September showed, there is a danger that infrastructure schemes are being allowed to stall – which would have clear consequences for wider investment in the regions many of those schemes are designed to benefit.

In six weeks’ time, the government will have another chance to address these issues, with chancellor Philip Hammond’s first autumn Budget. With construction’s pipelines looking uncertain, and the UK’s economic and social need for development rising unremittingly, the stage would appear to be set. But this will require the government both to heed the cues from the industry’s performance, and, crucially, follow a single script to address them.