Regional devolution could drastically alter construction’s relationship with the public sector
It’s tempting for contractors and consultants to wonder why on earth they should pay the blindest bit of notice to the government’s attempts to revise and realign the political power of the UK’s nations and cities. With so many other things to grab their attention - winning work, protecting margins, finding skilled staff - for most it comes pretty far down the priority list.
Certainly, even aside from the interminable, impenetrable and mostly meaningless policy guff written about the subject, the raw fact is that the public sector accounts for a much smaller share of construction’s workload than it did five years ago.
But nevertheless, it is important. For one, the wider public sector is still a huge customer - accounting for 26% of new work output. For the industry it seems like a many-headed hydra, comprising multiple departments, authorities and agencies - and understanding how it works is a basic requirement for winning any of its contracts. And understanding what that customer is doing better than your rivals is a great way of stealing a march on the competition.
And the reality is that this top client looks set to change. Regional devolution has been a buzz-phrase in local government circles ever since John Prescott launched his ill-fated attempt in the early noughties to create regional assemblies. To be precise, the current phrase is the even more policy-wonkish-sounding “city region devolution”, based around cities and their economic hinterlands, and reflecting more than anything the Tories’ aversion to all things John Prescott.
The really exciting thing for the industry is the possibility of cities choosing to invest more in local infrastructure than central government has done
The concept is at the heart of not just the debate over more powers to Scotland, but also the work done by Michael Heseltine in the last parliament to devolve greater power to cities, and chancellor George Osborne’s concept of a northern powerhouse to counterbalance the success of London and the South-east.
If successful, the policies have the potential to shift decision-making about construction work to a local level, with cities given a much bigger share of government spending power. As we discover in this week’s print edition (page 22), it is possible that the spending decisions of the likes of Network Rail and the Highways Agency could even be localised. The really exciting thing for the industry is the possibility of cities choosing to invest more in local infrastructure than central government has previously prioritised, in order to back ambitious growth plans.
And the new government has made a very encouraging start with this: Osborne made city devolution the topic of his first speech after being re-elected, prime minister David Cameron appointed arch-devolver Greg Clark to the important communities secretary job and northern powerhouse-supporting Goldman Sachs economist Jim O’Neill to the Treasury. Most importantly, a devolution bill was given pride of place in the government’s legislative programme.
Yet it is still not clear whether all this talk of city devolution is just all so much hot air. The real change would be giving cities and regions the ability to raise local taxes and borrow money to invest. Both of these more radical ideas are explicitly being ruled out under the proposed legislation. In a continuing age of austerity, this package could simply amount to giving cities the power to decide who takes the pain.
In order for the UK’s contractors, consultants and housebuilders to really sit up and take notice, more radical action should urgently be considered.
Joey Gardiner, deputy editor