New government initiatives show plans to attract private investment to the industry have not worked out as hoped
Governments very rarely admit that flagship policies are not working. But while chancellor George Osborne tried hard this week to dress up the government’s package of measures to help stimulate construction and infrastructure as evidence of the success of Britain’s “hard won fiscal credibility”, fundamentally, the launch of the new initiatives was an acknowledgement that the government’s plans to attract private investment to the industry have not worked out as hoped.
So the fact that the government has recognised this, and has acted with measures that should have a genuine impact in getting projects off the ground within the next 12 months, is something for which it should be applauded.
The measures announced by Osborne on Wednesday - a scheme to underwrite private finance for up to £40bn of infrastructure projects that can start within the next 12 months, and a temporary loan for £6bn of other infrastructure and construction PPP projects - address two of the major failings of previous efforts to help stimulate the economy through kickstarting construction projects (page 9).
The projects that will benefit will be ones that can start providing the bulk of their work for construction firms within the next year - not several years down the line
First, the fact that construction projects are deemed too risky by institutional investors for them to plug the gap in public funding in the way anticipated by the government. And second, the projects that will benefit will be ones that can start providing the bulk of their work for construction firms within the next year - not several years down the line, as has been the case with some of the higher-profile infrastructure projects launched recently. The announcements are particularly welcome as they come days after ONS figures showed a 22% fall in public sector construction work compared with last year.
But the boost should not stop here. Now the government has shown it supports the need for “shovel ready” projects as well as longer-term plans, there is a real opening for the industry to highlight the opportunities to target short-term investment in other areas, particularly housing, as Simon Rawlinson argues on page 24-25. The UK Contractors Group’s renewed push for construction investment, this week backed by a host of other professional bodies (pages 12-13), offers a powerful chance to get this message across.
Chinks of light
Two of the UK’s major construction companies have particular reason to be cheerful. Both Mace and Turner & Townsend unveiled impressive sets of results this week (pages 11 and 17), delivered with upbeat messages on the economic outlook which stand in stark contrast to industry-wide forecasts of a prolonged downturn.
The companies’ success might be cold comfort for struggling rivals, but it nonetheless offers a welcome sign that some, at least, are seeing chinks of light in the gloom. And both - with Mace starting to be rewarded for establishing itself as a fixed-price contractor and Turner & Townsend reaping the benefits of an overseas push - could be a useful reminder to those renewing business strategies that, even in recession, fortune can favour the brave.
Sarah Richardson, editor