What can construction expect from March’s Budget amid low demand for new orders?
On Monday we discovered that the UK economy shrank in November – unwelcome and unexpected news which pushed sterling even lower against the dollar. The ONS figures confirm the widespread view that 2019 was dominated by political uncertainty, Brexit fears and weakening global demand, with November’s 0.3% fall in GDP being the fourth consecutive month with no growth.
As we know, construction’s fate is closely tied to the health of the national economy. But surprise, surprise, construction output bucked the trend growing 1.9% in the month. In fact, the picture looks even better if you consider new work output for the year to November, when it grew 3.1% on the previous year.
But – and here’s the crunch – the story is very different when you look at new orders. The ONS data from Q2 and Q3 last year shows lowest level of demand since 2012. This does not bode well. Without a healthy pipeline of work the construction sector will not be able to maintain any momentum.
So what of the so-called “Boris bounce”. Will it happen? That’s the multibillion-pound question.
The March Budget will be compulsive viewing for the industry
Certainly we know from the Queen’s speech the government has pledged to boost infrastructure spending and is prepared to borrow to invest. The changed fiscal rules will put a new twist on the Budget, and as Simon Rawlinson points out this week, balancing the needs of left-behind communities with the government’s priority to boost GDP will not be easy.
But the March Budget will be compulsive viewing for the industry for another reason too – alongside big numbers from the chancellor, we are promised a new national infrastructure strategy as well as a new construction strategy.
As policy announcements go, these are two of the most important for this sector. Delayed by the December election, the construction strategy in particular will map out the route government wants you all to take to improve how you deliver its programme of work.
The previous strategy, which ran from 2016 to 2020, pledged to make savings of £1.7bn on public sector projects through, among other things, better use of digital technology and smarter procurement.
Expect this one to be no less ambitious. The exact details of what will be in it are not known, but there are big clues in all the work government has been doing on the likes of the Centre for Digital Built Britain, the Construction Innovation Hub and its call for evidence for a platform approach to design for manufacture and assembly. In short, expect new targets to tackle low productivity, skills gaps, carbon emissions, spiralling costs and project delays. Government as a client is going to demand more from you than ever before.
Chloë McCulloch is editor of Building