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The Chancellor’s Construction Conundrum

The UK’s ongoing economic problems have taken their toll and the UK construction industry has been teetering on the edge of recession for the last few months.

The Chancellor’s Construction Conundrum

The uncertainty in Britain’s economic future means investors are holding back on signing off on future projects. No one can dispute that the Chancellor has been dealt a tricky hand: the need to tackle the deficit through austerity measures whilst trying to stimulate a flailing economy seems like an impossible task. There are, however, ways in which he could be doing more to “Get Britain Building”, as has been famously promised.

Public Investments:

The Chancellor has announced £44 billion of investment into housing with the aim of building 300,000 new homes per year, a development which will be met positively across the industry.

Although there are some positive steps here, recent months have seen a consistent and steady decline in both civil engineering and commercial activity so the industry could do with a more significant leg up. Far more is required in order to have the desired effect – some key issues have been overlooked.

George Osbourne’s attempt to revive northern industry has seen significant infrastructure projects undertaken, such as the ambitious HS2. In October, the Chancellor announced another £400 million for further infrastructure projects in the north – a huge sum which will undeniably give the sector a healthy boost. He has also just announced the extension of the infrastructure fund from £23 billion to £31 billion.

These investments are a good starting point – attention certainly needs to be paid to UK housing and its ongoing crisis. The Government is well behind targets on this front and national prices continue to rise in relative cost. In Parliament, there’s a clear consensus on both sides of the house that an emergency strategy is needed on affordable housing. The encouragement of housebuilding will help solve this social crisis as well as providing a vital boost to the construction sector.

As of last week, Theresa May has declared the housing crisis a ‘personal’ mission. We will have to wait and see how effective the new investments will be. The Government must ensure it takes frequent advice from industry professionals on where the money would be most aptly used.

Commercial Support:

Investment alone, however, will not be enough. In order to really kick start the industry, the Government needs to create enthusiasm within the sector and encourage both businesses and individuals to take on new and innovative projects – something which will be crucial whilst the Brexit fog remains.

To stimulate things in this way, the Government should be spending time and money on creating and allocating bespoke grants and R&D incentives. Allocating rewards like these for ambitious projects will facilitate development plans, helping boost the economy but also inspiring a new wave of innovation in UK construction.

The problem with these at the moment is the difficulty and reluctance with which the rewards are granted by HMRC. Removing the obstacles that currently stand in the way when pursuing these incentives would get projects on the move and encourage people to undertake more.

HMRC’s belt-tightening has caused ventures to become stagnant. The bureaucracy and lack of coordination in R&D applications have made processes overly stringent, with case workers challenging every detail of applications. HMRC is not living up to the expectations of those in the sector. Despite loudly promoting the construction industry, the Government is withholding vital funding and failing to provide the necessary support. Actions are failing to match words.

With these issues being overlooked, construction in the UK will continue along its sluggish trajectory for the foreseeable future – at the very least until Brexit uncertainty passes.

Skills Shortage:

The Royal Institution of Chartered Surveyors released a report last week revealing a distinct lack of able construction workers. According to the data, two-thirds of surveyors are struggling to recruit the necessary man power for building projects. So why is there this lack of talent? ‘Brexodus’ may have played its part, but the problem goes deeper.

Attracting people to the industry is key. This has, in part, been addressed with the introduction of a £34 million fund for training construction workers. However more has to be done – this is a mere drop in the ocean!

Providing additional subsidies for apprenticeship schemes across the industry will help draw workers to pursue a career in the industry whilst also enabling businesses to take on and train new employees they otherwise wouldn’t.

Then in order to foster and retain talent from the grass roots, university courses must be made more appealing to students. Assistance should be given to universities to train aspiring construction workers by ensuring universities are capable, with all the necessary equipment.

What Next?

It seems clear that the Government needs to work closely with the industry. A ‘well-constructed’ plan involving a combination of private and public talent and investment will be essential. Naturally, the Government has its obligation to tackle the deficit, so now is the time to look to means beyond blanket infrastructure and housings investments. Innovation will be essential in the years to come.

By Justin Arnesen, Ayming, Director: R&D Tax and Grants