Uncertainty on key areas of regulation could act as brake on growth at a time when the industry looks set to turn a corner

Sarah Richardson 236

If certain opportunistic economists’ predictions are to be believed, the events at St Mary’s hospital on Monday could provide a bigger short-term economic boost than several of the government’s stimulus initiatives. But while predictions of a £250m royal baby-fuelled spending boom may seem fanciful - and in any case more likely to benefit purveyors of ceramic mugs than roof tiles - there is nonetheless a clear sense this week that a fledgling feelgood factor is also returning to the construction industry.

As we’ve reported over the past few months, the housing sector has been ahead of the curve in this respect, with the latest NHBC figures - showing that second quarter housing starts were up by over a third on a year ago - the most recent proof of a market steadily on the up.

However, this week there were the strongest signs yet that (whisper it) recovery is spreading to the wider industry. RICS research has found that in the second quarter of 2013 the number of new construction projects increased in almost every part of the country, with more surveyors reporting a rise in workloads than at any point in the last six years. This builds on and broadens a trend apparent among the largest contractors and housebuilders, revealed by Building’s top 150 league tables this week, which show collective turnover rose during 2012.

The government appears to be teetering dangerously on the brink of acting as a brake on growth

So, while there is clearly still a long way to go, the signs are there that the industry has turned a corner. And the most important thing now is that it continues on the current path to health, rather than lurching back into the no man’s land of recession.  

Government policies, as ever, will have a critical impact on what happens next. Whether or not the various stimulus measures introduced over the past two years have contributed in a meaningful way to the current uptick is debatable: in housing, yes; elsewhere, not so much. But perhaps now more worrying than the fact that policy has had a less-than-hoped-for impact on recovery, is the impression that the government is teetering dangerously on the brink of acting as a brake on growth.

This danger has been brought into focus this week by fresh delays to two crucial areas of policy development. The government looks to have dropped plans to implement changes to the Part L energy performance regulations this year - a move long feared by industry experts - and a further delay has also emerged to its wide-ranging review of housing standards and regulations (page 9).
As economists and industry alike are well aware, uncertainty around the introduction of regulations that are central to development has a worrying tendency to lead to a slowdown - or worse, a hiatus - in projects on the ground. And the longer this uncertainty continues, the worse the impact could be.

When workloads are bumping along the bottom, policy makers arguably have more time to play with. But with the industry picking up momentum, it is critical that these much-trailed changes are introduced when the market has been told to expect them - because the damage that could be caused by not doing so is all the greater.

Sarah Richardson, editor