But firms could take skills abroad pursuing alternative high-speed rail jobs

The cancellation of the second leg of HS2 opens opportunities for other projects to draw on released supply chain capacity, according to Turner & Townsend. 

In its winter market intelligence report, the consultant said clients seeking to benefit from the industry’s recalibration would have to be “agile” and may need to update the way they procure and finance capital expenditure. 

“The fact that HS2’s northern leg was in pre-construction when it was cancelled means the immediate impact has been felt most keenly by consultancies and ground engineers, rather than main contractors,” the report said. 


Source: Treasury/flickr

Chancellor Jeremy Hunt visits Euston station in October along with Euston Partnership Board chair Sir Peter Hendy

It said Tier One firms intent on working on high-speed rail could look for similar programmes overseas, which “could mean a temporary export of skills”. 

“But contractors of this scale will invariably have the depth of skills and experience needed to deliver projects not just in other infrastructure sectors but also in real estate, meaning the alteration of HS2’s second phase may end up boosting supply chain capacity across UK construction as a whole,” it added. 

T&T called for clients to consider their design strategies against the current economic uncertainty, suggesting a more traditional model of built asset investment could allow greater control and time to monitor markets and costs.  

The consultant said the recalibration of the market could increase competition for tenders and a resultant cooling of tender price inflation, which it forecast would drop to 2.7% for real estate in 2024, down from 3.7% in 2023. 

This year’s forecast was the same as T&T had previously predicted, with softening demand cancelling out the effects of skilled labour shortages and wage rises. 

While Q3 was the eighth successive quarter of output growth, with a 0.1% expansion recorded, there has been a notable slowdown on 2022. 

Output increased 2.5% over the past year, compared with 6.5% the year prior, with the fall driven primarily by falling housebuilding activity – in Q3 alone, total new housing output dropped 2.4%. 

Despite these challenges, the report said the sector should be encouraged by a 3.9% increase in construction orders in Q3, after three consecutive quarters of contraction. 

Martin Sudweeks, UK managing director of cost management at Turner & Townsend, said: “The full effects of the government’s change in tack on infrastructure remain to be seen.    

“For now, we need to focus on the challenges at hand and make the most of programmes in planning and in flight.   

“The construction sector remains resilient as we weather economic storms, with particular areas in real estate, such as retrofit and refurbishment, strengthening significantly.  

“More broadly, the real estate market can also expect to see reflected benefits from the planned investment in transport in the North of England as greater access opens opportunities for development.  

“This is not to say that it’s smooth sailing for the sector. High interest rates and skills shortages put pressure on our capacity to deliver.   

“Clients must remain flexible in the face of these difficulties, and continually re-evaluate the way they procure and manage their projects. Investment in digitalisation is one way that clients can get ahead.”