Election reaction: Where uncertainty will hit construction

Hours after her shock failure to win a parliamentary majority, under-fire prime minister Theresa May has promised to provide “certainty” for the UK by remaining in government off the back of a deal with the DUP. But with that arrangement seemingly based on a vote-by-vote backing, from partners that would between them still only command a paper-thin majority, the only real certainty after this morning’s election result is that turbulent political events of the past year are far from at an end.

So where does that leave construction – an industry that traditionally believes political and economic uncertainty to be almost as much of a disaster as May’s campaign has been for the Tories?

Several industry commentators, including KPMG’s Richard Threlfall and Barbour ABI economist Michael Dall, have already sought to make the point today that things may not be all that bad. In fact, Threlfall argues in his Building opinion piece today that the more consensual style of politics that emerges in a hung parliament may even help construction.

Unfettered, Theresa May’s Conservatives had plans to adopt a hard-line approach to immigration post-Brexit that would have hit construction’s ability to recruit the workers it needs to plug skills gaps. Maybe now there is more chance of a pragmatic approach to the industry’s labour needs that helps the sector transition to a state where it needs fewer workers, and trains more.

Also, Threlfall argues, the fact there is to a large degree political consensus around public-sector led construction programmes – including infrastructure and housing – means that the deadlock the industry assumes will happen over spending may not materialise.

Maybe now there is more chance of a pragmatic approach to the industry’s labour needs that helps the sector transition to a state where it needs fewer workers, and trains more

For a sector in which projects can take several years to get off the ground, it’s to be hoped that he is right. When it comes to housing, the need for investment is so inarguable that he surely is. And on a further positive note, if Theresa May does hang on to power, she might be pressured into putting further cash behind affordable housing – something the Conservatives conspicuously failed to do in their manifesto, despite promising a “new generation” of council homes.

On infrastructure, the idea that a more consensual government will ensure we get the projects we need – not the ones we don’t – is one it’s easy to get behind. But in practice, there’s a fine line between this ideal scenario and inertia.

The existence of the National Infrastructure Commission, charged with ensuring successive governments deliver the infrastructure the UK needs, ought to provide some certainty around long-term infrastructure spend; but the jury is still out on whether, as an agency of the Treasury, it has the teeth it needs to do so. We may be about to find out.

The problems here aren’t going to be around the current pipeline – more the chances of getting new mega-projects through parliament, as the precarious position of the Conservatives will give MPs arguing anti-development policies on behalf of constituents more power.

So, when it comes to public sector work, it’s going to have to be a case of wait and see, and perhaps a certain amount of crossing of fingers. Where there definitely is reason to worry about uncertainty is in commercial work, already on a downward trend: in spring, the CPA forecasted a 3% decline in office work this year, and 10% next year. Investors will not like the weakening of May’s hand in government any more than they like the confusion around Brexit negotiations: those heavily-reliant on commercial work would do well to cast their nets slightly wider – if indeed, they aren’t already.

Sarah Richardson, editor