Business management

The future of the construction industry: levelling up the UK

We look at how the government’s programme of projects intended to ‘level up’ the local economies of UK. How will this initiative affect the construction industry?

What opportunities do you see for the construction industry from planned investment in infrastructure and regional cities to enable fairer growth?

“Public infrastructure spending by government is a real driver of growth and stability in our sector, which has been so badly impacted by Brexit, Covid-19, and the conflict in Ukraine. So at a time when balance sheets in the construction sector are under pressure, infrastructure gives us an opportunity to have a predictable flow of income from a contracting type that doesn't unduly allocate risk to the contractor, putting additional pressure on those stretched balance sheets.

“Also, with some of these large public infrastructure projects, we have long-term predictable income, and for a sector such as construction, predictable income allows us the confidence to invest in innovation, training, and development for our workers. So, fundamentally, it’s good for our sector.”

What role can the construction industry play to help every region reach its potential?

“We’re at the forefront in the delivery of public infrastructure assets, and they will hopefully act as a conduit to encourage the localised development that comes along afterwards.

“If we take the example of the development around the new Crossrail stations, and apply that logic to HS2, TransPennine and the A66 road upgrades, those public infrastructure assets will encourage further localised development of houses, offices and leisure facilities. It’s in the development of those add-on facilities that we’ll see economic growth starting to blossom in the regions.”

In which specific ways can the construction industry create jobs and boost investment in regional economies?

“There will be a huge demand in the next 10 years for additional resources within the sector. It’s the nature of our industry that you need to deploy people on-site to do things, so we’ll end up drawing on a pool of apprentices from across the UK regions, and we’ll have to work with their local colleges and our on-site teams to develop people with skills that are ultimately going to be highly sought after.

“People going into construction apprenticeships will end up in jobs that are paying significantly above the minimum wage.”

How can companies in the industry prepare for a ramping up of construction activity in their areas?

“Ramping up is difficult in our industry because holding plant and labour in limbo waiting for the beginning of a project is a very expensive activity. The challenge is knowing when you’ll be able to deploy them, and government infrastructure programmes have notoriously long lead times between announcement and delivery on-site.

Levelling up: why it’s good for the construction industry

  • infrastructure projects will aid sector recovery
  • government spending drives growth
  • local development follows infrastructure improvements
  • jobs will be created for a growing labour force

“You want to ensure that you retain the workforce and the plant because they’re part of the national capability. But at the same time, you then have to pay them. It’s a catch-22.”

Are there any potential pain points for the construction industry in delivering large infrastructure and regional urban projects? Is the availability of labour in the regions a concern, for instance?

“We currently have an infrastructure project in Cornwall, and it took us quite a while to get it staffed and up and running because it’s not a traditional location for migratory labour. We actually did have to get some of our London staff to move to Cornwall and find accommodation for them.

“However, since it’s a ‘target cost’ project, as many infrastructure projects are, it does protect us against a growing cost base or inflationary pressures. That’s one of the reasons why public infrastructure will be a huge boost to the construction sector in the current economic climate and its aftermath.”

Could a construction boom in the regions affect the availability of labour in the South East. Do you anticipate a migration of workers?

“It’s worth noting that a lot of that ramping up of labour for these regional projects is going to be with workers who are already in the construction sector and originally from that region, but who are currently working in the South East and London. They’ll essentially be going home to participate in the regional project and to be nearer friends and family. I do think London and the South East could feel the pinch because of that.”

How will current, global supply chain issues affect the construction industry’s ability to deliver on regional projects?

“For larger projects, rising costs are the biggest pressure, not necessarily the ability to get hold of the necessary materials, and the challenge is whether the regional budgets can flex to accommodate the level of inflation we’re seeing.

“For instance, Russia, Ukraine, and Belarus were significant manufacturers of reinforced steel, so we've seen the price rise from £480 a tonne to £1,150 a tonne in 18 months, including a rise of £300 per tonne in a single day. Thankfully, that’s starting to soften now as the global supply chain starts to kick in and new sources open up.

“Infrastructure projects tend to have a better chance of getting supply because they have predictable demand. So, as a supplier, if your volume is 1,500 cubic metres of concrete a day and there’s an infrastructure project that will take 500 cubic metres of that day after day, they’re always going to get priority. It’s the smaller, ancillary projects that are going to face with supply problems.”

How can the sector continue to support regional economies after projects are completed?

“When you create public infrastructure, you’re priming the pump for local development to come in behind it. Some of the people who are involved in the delivery of these large public infrastructure assets will stay on to be involved in the local development that comes afterwards.

“The delivery of infrastructure motivates local planning departments to continue to improve the quality of the local, built environment – and that creates jobs and supports local economies.”

Look out for more content coming soon on the opportunities and challenges in the construction sector, including areas such as supply chains and regional economy investment.

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