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Written by Tom Hall, Chief Economist at Barbour ABI
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Recent declarations on the future of infrastructure investment have suggested the UK, and indeed world infrastructure is in for a boom period as governments decarbonise and invest in public services after 30 years of underinvestment.
Analysis of our planning pipeline suggests a strong next couple of years for the infrastructure and public sectors. After that things become more uncertain. Recently planners have been focused on bringing forward “shovel ready” projects. Which is great but it makes it difficult to understand the longer-term trajectory and for firms to make investment and strategy decisions.
The COP26 summit in November will throw the challenges of mitigating and adapting to climate change into stark relief.
The drivers are there for all to see. As parts of the world burn this summer, the obvious impacts of human-created climate change are here and increasingly impossible to ignore. We will need to:
If the Covid-19 pandemic has taught us anything, its that a least cost approach to public services doesn’t produce good results, other than on an accountant’s balance sheet. The positive externalities from strong public services are well-evidenced and not only create greater well-being among the population but also, rather than crowding out the private sector, allow it to flourish.
Recent media articles have suggested that the Treasury aims to reduce the scale of levelling up programmes. Its focus is reducing the UK’s now 100% debt to GDP ratio, a result of the 2008 bank bailout, the growth-sapping costs of 2010’s austerity and the Covid-19 pandemic.
Additionally, Brexit means higher cost inflation in imported goods, shortages of labour and materials, and additional trade barriers, making UK construction more expensive and inefficient.
Climate change also cuts both ways – carbon-intensive projects (such as road building and Heathrow’s new runway) may be reassessed as such projects conflict with decarbonisation.
Population is another issue. We’ve got used to an ever-rising population and the demand for new construction that places on the industry. However, with a new immigration system we may well see a static or declining population. This is likely to change the demand for construction away from new work – what will we do with the 1 in 7 shops that currently stand empty?
Our data suggests a strong infrastructure pipeline over the next few years. After that, its trajectory is more uncertain. Higher investment will be unavoidable, however may be tempered over the medium term until deeply entrenched mentalities change.
Our environment is priceless to us, its time we took greater care of it. That goes obviously for our natural environment but also our built environment.
1. Investment is not a cost. It’s time we realise the long-term benefits of having great infrastructure and public services and fully recognise the environmental and societal damage of certain decisions.
2. Think and act big. The sooner we delay, the higher the cost and impact of climate change will be: spend less now, save forever.
3. Collaborate. Thinking together and working together, bringing together individuals with diverse skillsets produces better results that work for everyone.
4. Long-term planning. Spraying money around without a plan is inefficient. Create a plan based on the best information at the time, monitor progress and adapt it as the situation changes.
If you’re interested in reading more on the forces impacting the future of the construction industry, check out Recreative Construction, our series of free whitepapers authored by Experienced Construction Industry Commentator Brian Green with a foreword by Noble Francis, Economics Director at the Construction Products Association. Sign up to read the series here.