Reading the signals from our new PM

Given the frenetic speed of change in Westminster over the past three weeks, it is almost unsurprising that a Conservative Party that until Monday was set for a nine-week leadership election has suddenly landed itself a new leader, and therefore handed the country an instant new prime minister.

Theresa May’s abrupt arrival in Britain’s top job should, at the very least, restore some sense of stability to the country’s leadership (notwithstanding that pressure to call an election is still in danger of leaving Number 10 in the charge of Larry the cat - the resident mouser who, these days, seems Westminster’s most secure occupant).

For construction, May’s appointment could not have been more timely. Hours before her victory was assured, market analyst Experian slashed its forecasts for the industry’s growth this year from 2% to near-flat. The cut takes account of a slowdown in the market in the run-up to the EU referendum; but crucially, it does not reflect the effect of the result, which was unknown when the forecasts were prepared. Experian’s view on the impact of Brexit is that it “is currently unquantifiable, but is almost certain to be negative,” - a sombre warning that leaves the spectre of recession in construction an unspoken, but hanging possibility.

The stated view of May - formerly a somewhat fainthearted Remainer - on Brexit is that the country has voted for it, and therefore it will happen. In a high-profile speech on Tuesday, she pledged to set out her plans to take the economy through the current period of uncertainty “in the coming weeks”. And for construction, tied as its fortunes are to the wider economy, that plan cannot come soon enough.

But even before those plans are set out, May’s long-term vision for the UK’s economy should offer some reassurance - and even, dare it be mentioned - encouragement, to the sector.

In the same speech, the new prime minister talked passionately about the need to supply more housing, and repeatedly referred to infrastructure development, signalling that she may share her predecessor’s enthusiasm for hard hat appearances on the UK’s mega projects. But what was most significant about May’s vision, from the industry’s perspective, was the allusion she made to the financing of these schemes.

Promising “more Treasury-backed bonds for infrastructure projects”, May appeared to signal a shift from the diktat of austerity that has characterised the last six years of the Conservative leadership’s approach to the public financing of schemes. And the sense that she envisages a greater role for the public sector in funding development work was further enhanced by a nod to the potential of mutuals, set up by public sector workers, to benefit from the creation of new housing and roads.

The way has already been paved for this less austere approach by chancellor George Osborne’s decision to scrap the government’s commitment to achieving a budget surplus by 2020, which although pinned on the fallout from Brexit, neatly divorced the government from a target many considered unachievable for an economy that is still far from flying.

The idea that May - a Cabinet member since 2010 - will completely reverse the policy of the past eight years to launch a full-blown stimulus programme, like Labour’s in 2008, would be fanciful. And in any case, such a move would be fraught with difficulty given the uncertainties over the impact of Brexit on public, as well as private, finances. But there are degrees of intervention, and where Cameron’s government fixed itself resolutely at one end of the scale, May appears to be advocating a more balanced view.

So it won’t be a blank cheque by any means. But there is a lot to be said for the potential for a beefed-up state-backed programme of development to help ride out an otherwise unpredictable market drop, whether that is through direct funding or a policy environment that promotes a broader mix of project finance. The early signs are that May is well aware of this. She might yet drag a winning formula out of the chaos of the past few weeks.

Sarah Richardson, editor