The Budget was a signifier of tone shift – never mind the missing detail

Budget day can be anti-climactic; the chancellor says a lot, without saying much in the way of detail. The traditional approach for industry commentators is then to spend the subsequent days picking through the detail, and reflecting critically on how it could have gone further, or identifying that it lacks a key enabler.

An alternative approach is for those in construction and infrastructure to treat it as a temperature check for the industry. In this way, we can allow it to show us where the momentum and conversation is building, rather than waiting for the detail to be set out for us. This can focus our attention on the key themes towards which we should pivot our effort and develop our own solutions.

An open door for AI-enabled and digital productivity

Something must change in the way we go to work in construction, where productivity has flat-lined since the 1950s. The cross-sector productivity problem featured heavily in Rachel Reeves’ statement, with the chancellor referencing Lord Darzi’s report into the health system (which found that “parts of the NHS are yet to enter the digital era”), and every department set a 2% productivity, efficiency and savings target.

Resource and skills availability is an endemic problem in construction, so this is a clear indication that, across all sectors, we need to “break the FTE curve”, where more is achieved simply as a function of having more people.

The 2% target in the statement tells us that construction can take inspiration from British Cycling’s marginal gains approach. It tells us to think about how we can do more with less, enabled by digital and AI tools.

We were all entertained by recent reports that Northern Trains uses fax machines for managing time-off requests. But, in our day-to-day construction work, we know we are going to use system A to see the site drawings, then tool B to manage the schedule, portal C to raise a change request, never mind that at least some of the subcontractors will record their labour hours on paper forms.

Standing time still wastes significant time on every site, as operatives wait for materials, equipment, others to finish their work, or permits to arrive from supervisors. Seriously embracing smarter digital tools to both plan and deliver work means that, even if we are not making the big gains that come from step changes like factory-based industrialisation, there are still productivity savings to be made on every job site.

Getting serious about a decarbonised grid

With every Budget, we get closer to 2050 and the commitment to be net zero carbon. As of 1 October this year, the UK no longer generates any electricity from coal, and wind is now our top source of power generation.

The statement contained broad-ranging commitments to large and small modular nuclear, electrolytic hydrogen and carbon capture and storage, although the usual scepticism applies about how much of this is new commitment. In the Labour manifesto, the 2030 phase-out target for petrol and diesel vehicles was reinstated.

This influence on both the demand and supply side of energy generation tells us the conversation is changing about energy resilience for all sectors. We will see this impact major infrastructure, as we already see major residential developments impacted by their ability to access grid power connections.

The appetite exists within government for private sector funding interventions, and industry can lead the conversation here

We can move now to embrace the step change in energy approach by developing self-sufficient buildings and infrastructure which do not require the grid to function. Amazon and Google are leading the market with this, each having signed agreements to support the development of their own nuclear energy projects (small modular reactors) to power their data centres.

Data centres are particularly energy intensive, but we can take this as the sign across the industry to supplement the current focus of smart design, which reduces energy need with energy resilience through self-generation.

Lead the conversation on private investment

Higher levels of private investment are part of the government’s growth mission, and featured heavily in the statement through the contribution of the National Wealth Fund. This shows us that the economic landscape of projects, particularly mega-projects, is changing away from a public-sector finance focus.

A Nuclear Energy (Financing) Bill is waiting for its second reading in the Lords to allow greater use of the Regulated Asset Base model of funding, which has already been used for Thames Tideway and which could be used more widely. The appetite exists within government for private sector funding interventions, and industry can lead the conversation here to shape the solution.

When private finance is mentioned, a typical first thought is often towards models of PFI. While these supported a boom in major development, they left a difficult legacy, particularly with many coming to the end of their PFI periods now.

The construction industry can seize on this clear appetite for investment by developing and shaping novel, packaged solutions for commercial deals with the public sector.

Holly Davis is infrastructure advisory director at KPMG. This article is written in a personal capacity