While the macroeconomic picture and wobbly domestic outlook do cause concern and create uncertainty, things are nowhere near as bad as they were a decade ago
Are you worried about the current uncertain economy and the impact on your future? Ten years since the most severe financial crash in a generation sent financial institutions and UK construction into a downward spiral, this week we look at its long-term impact and how it has changed the industry.
Many blame Brexit for the negative forecasts now being made for the UK economy, as well as struggling consumer spending and even the stagnating Chinese economy. Yes, these are concerns – but consider that 10 years ago things were a whole lot worse, with the economic picture resembling a horror movie.
When Lehman Brothers lost half its value in the first six months of 2008 before eventually collapsing in the autumn, it sent a shockwave around the world. The impact of subprime mortgages, banking contagion and the wobbling debt profile of financial institutions everywhere shook investors in near-on every sector. You only have to read the resulting war stories of major construction projects being put on hold – and the resulting job losses across architectural firms, consultants and contractors as well as housebuilders’ crumbling share prices – to appreciate how nightmarish the situation became for everyone.
Even the government was at it. The highest-spending department, education, cut its Building Schools for the Future programme in the stroke of a pen, bringing misery to many operating in the sector, never mind a lost generation of buildings. There was a major structural impact too, as Noble Francis points out. In each recession, construction suffers a 20% loss of its workforce, with a large number of the most talented people simply failing to return with the good times.
Reflecting on the severity of the crash at the time, architect Jack Pringle believed that it would take five years for the industry to recover – and in terms of people and talent it probably took even longer for new skilled workers to be recruited and in a position to deliver buildings. Everyone felt the pinch, as employers had to pay inflated wages for scarce skill sets and the eventual schemes were only as good as the skills that could be found to build them.
So we should put the current economic jitters into perspective – while there is uncertainty right now, there is also huge demand for housing and with it the infrastructure and regeneration required to deliver it. The outlook for the infrastructure sector in its own right is positively vibrant, with many billions of projects in the pipeline. And there is still steady spending by the public sector, which shows no sign of abating. Finally, there is a new breed of project emerging, with a healthy pipeline being generated from data centres, and also modern technology companies, which need new tech infrastructure and have all the cash needed to pay for it.
And finally, the government has to make its next move too, and when elections come (like last year’s), investment usually follows. Any government bid to unlock banked land, prompt estate renewals and kick-start a new generation of council housing – either via top-down policy or by fostering a boom in offsite manufacturing – can only send the figures upward.
The underlying point is a simple one. Remember that while the macroeconomic picture and wobbly domestic outlook do cause concern and create uncertainty, things are nowhere near as bad as they were a decade ago. So get investing. And let’s not talk ourselves into a recession just yet if we can help it – as there is plenty to be positive about.
Tom Broughton, editor-in-chief, Building