How can the new administration boost the construction sector?

Now that Boris Johnson has been appointed as our new Prime Minister, we could see some significant policy changes. Undoubtedly, many within the construction sector will be wondering how the new administration plans to help the industry thrive.

Recently released data has shown that construction output flatlined in the three months to May 2019[1], as Brexit uncertainty continues to cause disruption throughout the industry. More worrying figures have also been published in the latest Purchasing Managers’ Index (PMI), which fell to 43.1, down from 48.6 in May – the biggest decline in UK construction output since 2009[2].

In this volatile environment, Government support is vital to ensure that construction businesses can survive. In recent years, the Government has made some positive steps to back construction organisations, from the SME Action Plan to the Built Environment Sector Deal. But will support for the construction industry be a priority for Boris Johnson’s government?

Many were enthused by his promise of ‘better infrastructure’ in his acceptance speech – but how can the new administration make sure the construction industry is robust enough to deliver this promise? Here are a few key steps they should take now…

Use their influence as a key client

The Government is the construction industry’s biggest client, as the public sector commissions around a quarter of all construction output in the UK. This gives them considerable influence over the marketplace, and so if they can demonstrate best practice, they could significantly change the way the industry works. Since public sector buyers have been required to use PAS 91 as the basis for their pre-qualification questionnaires, for example, many private sector clients have also adopted PAS 91 as a baseline.

Support SMEs

If the new Government wants to support the construction industry, then they must put new policies in place to support SMEs, which account for almost 99% of construction businesses. One of the biggest challenges facing the industry – and smaller businesses in particular – is payment terms, with late payments threatening the survival of many organisations.

The Government has already proposed some key changes to the way construction companies are paid for public sector projects. There’s the Aldous Bill, which requires retention monies to be held in a third-party trust, and which is already before Parliament. Another significant change would be the introduction of the Project Bank Account system proposed by MP Debbie Abrahams, which will require funds to be deposited in a public bank account and see payments released to contractors and subcontractors simultaneously.

While these Bills (if passed) will only affect public sector contracts, this is one of the ways that the Government could use its influence as an important client to encourage change across the entire industry.

Commit to improving infrastructure

Boris has promised to deliver better infrastructure, and many within the industry will agree that it’s vital for the new Government to get behind key infrastructure projects such as HS2 and the expansion of Heathrow Airport.

Our new Prime Minister hasn’t always been supportive of a third runway being built at Heathrow Airport – in fact, he once said he would ‘lie down in front of bulldozers’ to prevent it from happening. He has also expressed doubts about HS2. However, it seems he may have changed his mind on both projects, as he has promised to review HS2 and it’s reported that he has now accepted that the Heathrow expansion must progress.

Whether he decides to go ahead with HS2, Heathrow and other key infrastructure projects remains to be seen – but it’s crucial for him to clear up any uncertainty sooner rather than later. Many within the construction industry will be hoping that the National Infrastructure Strategy, due to be published in the autumn, will contain a practical, long-term plan for the development of UK infrastructure.

Supporting you into the future

With Brexit on the horizon, the appointment of a new Prime Minister is creating yet more uncertainty for the construction sector – but for now, we can be hopeful that Boris Johnson will deliver on his promise to improve the UK’s infrastructure.

In the meantime, you can mitigate the impact of falling output on your business by signing up to become a Constructionline supplier member. Over 10,000 buyers from nearly 4,000 public and private sector organisations use the Constructionline platform to find suppliers, so you can be sure to never miss an opportunity. To find out more about our supplier memberships, click here.

[1] https://www.pbctoday.co.uk/news/planning-construction-news/output-figures-ons/59822/

[2] https://www.independent.co.uk/news/business/news/pmi-slide-uk-construction-drop-output-building-a8984176.html

 

Blog Public Sector, SMEs
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