The chancellor’s pledge to drive a ‘northern powerhouse’ economy and backing for a north-east-north-west high-speed rail line offer welcome prospects for work
The degree to which Westminster politicians have become abruptly and resolutely north-facing over the past month is as encouraging for the balance of the UK economy – and for construction – as it is sudden.
For a regional economy which was hit far harder by recession than the South of England thanks to its vulnerability to public spending cuts, the concerted political focus on its future offers both long-awaited promise and an inescapable sense of justice. In construction terms, evidence of recovery has been increasing steadily over the past 18 months, with output across the three northern regions up by £700m in the first half of 2014 compared with a year earlier. But development is still lagging behind pre-recession levels, and the continuing gap in economic performance against the South has led to fears over the speed with which developments on costly brownfield sites, in particular, will return to commercial viability.
Construction work inside the M25, over the last five years, may have fared noticeably better than it did in the North, but the legacy of problems that recession has left firms as a result of this southern bias is only just emerging
Against that background, George Osborne’s pledge to drive a “northern powerhouse” economy, replete with extensive infrastructure development, and this week’s government backing for a north-east-north-west high-speed rail line, dubbed HS3, offer welcome prospects for work in the medium-term. And even more encouragingly, they send a signal that the government is serious about wanting to create a more balanced, robust economy in the North.
This ambition, if it can be realised, would be of obvious benefit to the region, leading to more sustainable employment opportunities and promoting improved standards of living for many communities. And for large numbers of businesses, not least in construction, it would offer welcome reason to rebalance their work away from an over-reliance on the South of England.
Construction work inside the M25, over the last five years, may have fared noticeably better than it did in the North, but the legacy of problems that recession has left firms as a result of this southern bias is only just emerging. The fact that what pipelines of work existed during the downturn were vastly concentrated in the South meant that companies that would otherwise have spread their work around the country were forced to pile in for bids, with the competition driving down prices to unsustainable levels. The problems this is causing main contractors trying to service these bids in an upturn, with labour and material costs shooting skywards, are only now becoming apparent. Already – with Morgan Sindall the latest company to issue a profit warning this week on the basis of increasing costs on jobs in the South – it is cause for serious concern.
It is hard not to think this situation could have been avoided, or at least mitigated, if Labour had had more success in its own ambition to rebalance the UK economy when it was in power. The will was certainly there, but in practice, policies and development programmes never progressed far enough to protect them from the axe in an era of austerity.
The challenge for the coalition, and for whatever administration follows it, is to turn the current pledges into a long-term plan that has a momentum that is far harder to reverse – and to do it before the country finds itself on the brink of the next potential economic downturn.
Sarah Richardson, editor