Is a construction spending leap about to happen in the UK?
After the Conservative victory in the general election in December, the construction sector is currently looking ahead to a potential boom from 2020 onward. Expectations are high after the many promises that were made in the run up to the election, as well as the indications after the results that infrastructure would be a particular priority for this government in order to ensure that it keeps recently won seats. But can we realistically expect construction spending to rise significantly and what are the key factors that could cause this to happen?
Infrastructure spending was made a priority during the election campaign
Particularly notable was the promise that was made by chancellor Sajid Javid to spend an additional £20 billion a year on capital projects, including railways and roads. The construction industry will clearly benefit from investment made in these types of infrastructure projects, especially if the Conservative’s “get it done” approach is applied to improve road, rail and housing projects as well as to Brexit.
However, some have urged caution in terms of expectations when it comes to a construction boom. According to the Institute for Fiscal Studies, the promises that were made by both parties in the run up to the election could be difficult to deliver on. It said that a construction boom would require the government to directly tackle “shortages in the number of suitably skilled construction workers, a dearth of ‘shovel-ready’ projects and practical issues relating to delivery.”
Why might construction spending be about to take a leap?
In addition to the promises made before the election there are a number of other factors that could have a positive impact on construction spending, including:
New Conservative MPs in northern constituencies
This was an unusual election in that many traditionally Labour areas turned Conservative for the first time. Those new MPs have already begun to focus on the need to deliver on ambitious infrastructure plans in the north in order to give back to the constituents who supported them. This could lead to pressure to deliver on promises made to construct new rail, roads and stations that pours cash into the construction sector to make it happen.
Promises made with respect to housing
As the Conservative manifesto outlined plans to build a million more homes over the next five years, the housing side of the construction sector looks likely to get a lot more attention – and cash – in the years to come.
A clear mandate
Unlikely many previous governments this one has a clear mandate to deliver on election promises because of the decisiveness of the victory. Many of those promises relate to improving infrastructure and housing and so the government is likely to pour cash into construction in these areas, as there will be nowhere to hide in terms of not living up to what was in the manifesto that delivered such a clear victory.
A Conservative victory in the election doesn’t necessarily mean that construction spending is likely to rise. However, the significant nature of the victory, combined with the need to sustain voter confidence and deliver on so many infrastructure related promises could mean that it is now a priority.
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