Cutting infrastructure investment will put jobs and key national objectives at risk while raising costs in the long-term.
The Bank of England has predicted the UK economy will soon fall into recession, with inflation rising to 13.3%.
This is notably due to the impact of the Covid-19 pandemic and Russia’s invasion of Ukraine.
The conflict has blocked supply chains and caused a dramatic increase in energy prices.
Reduced access to foreign workers, products and materials following Brexit are also contributing to low growth.
Rapidly rising interest rates and inflation are now impacting every aspect of our lives.
Expect lower taxes but no increase in public spending
The length of the conflict in Ukraine and future energy costs will be key to determining how quickly we emerge from this expected recession.
It’s likely that businesses and consumers will ‘batten down the hatches’ – spending less and managing as best they can.
Commentators have suggested that the government may cut taxes in response, but there is little expectation of additional public spend.
No repetition of 2008
The construction industry was hit hard by the 2008 recession but generally survived Covid-19.
After the crash of 2008, subsequent governments scaled back investment in a range of public infrastructure projects.
As a result, many supply chain businesses collapsed but, perhaps more importantly, a key workforce was scattered into new sectors at home, and new roles abroad.
This loss of staff devastated our industry.
In the long term, later governments recognised the strategic value of the paused projects but were forced to re-procure and deliver them at much greater cost.
Working with government to deliver value and efficiency
In the decade since the last recession, the construction industry has made the case for sustained infrastructure investment.
This has been supported by the various governments and investment has risen.
It’s now recognised that infrastructure funding helps to achieve economic and social growth.
At the same time, industry has played its part in driving efficient, collaborative and optimum value projects.
But we’re now at a critical time.
There’s severe concern in the industry about how the government will seek to manage the looming recession and whether the lessons of 2008 have been learnt.
Infrastructure investment boosts growth
CECA research has indicated that for each £1 billion increase in infrastructure investment, UK-wide GDP increases by £1.299 billion.
Every £1 billion spent on infrastructure construction increases overall economic activity by £2.842 billion.
We strongly believe that the new government must fully commit to existing infrastructure plans and projects.
These include the next roads, rail and water settlements, and the Integrated Rail Plan.
Just as important is continued support for the drive to net zero and energy efficiency.
Act now to protect the industry
We recognise the challenges of arguing for further investment in these difficult times – and we’re not asking for this.
Instead, we’re warning about the risks of devastating the market and increasing long-term public cost if existing infrastructure opportunities and commitments fall by the wayside.
In the short term, there are three key steps the new prime minister can take to support our industry and protect market confidence in the coming months:
- Maintain certainty, consistency and continuity of existing investment programmes.
- Keep faith in recent work to improve commercial relationships and avoid backsliding into adversarial lowest-bid culture.
- Work with industry to target business support where it is needed.
CECA will be attending the main political party conferences this autumn to discuss our ideas with ministers, their shadows, parliamentarians and other stakeholders.
If you would like to feed into our policy-making process, please email [email protected].
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