2017 – More change to follow
The world has changed and no doubt 2017 will bring even more of the unexpected. This month sees President Trump take office – wow… I never ever thought I’d write those words! The process of exiting the EU will also gather pace, that’s assuming the courts don’t delay the inevitable even more.
Leaving the EU will dominate the news and political agenda during 2017 and it will have a huge impact on the UK construction sector. Construction relies heavily on EU labour, many materials are imported and a lot of investment funds come from outside the UK. Possible trade tariffs and US protectionism could also shake up the materials markets in 2017, while the weakening pound is going to increase the cost of imported goods.
Until decisions on Brexit are taken the commercial market will continue to slow. A fall in new work has already begun inside the M25 but while the supply chain is working through a glut of work the real impact is still some months off.
Expect to see cut-throat tendering returning as some contractors struggle to secure workload. So watch out for a big name casualty if investors lose confidence in the UK market and new work opportunities decline further.
Government housing policies must become reality to have any impact. So often headline crabbing new home targets have failed to materialise. Proposals to fund infrastructure improvements around new residential developments, build more social housing schemes and start to free up green belts have to happen if residential is to keep the industry growing.
Sadly home ownership is now a distant dream of many as affordability is an issue. We will see a continuing expansion in the private rented sector and less buy-to-let investing. If penalties for holding land banks are introduced this will have more impact on house building outside of London than plans to exit the EU. Until funding becomes available for smaller developers to boost supply the major house builders will continue to dominate the market.
There are signs that the London property has lost some of its strength at the high end. In 2017 we could see the pressure on prices rising but in areas of high demand shortages in supply will keep prices up. However, instability in other European nations and the fact that foreign investors now get more for their money, could soon see London’s status as a safe haven and good investment being reinforced.
Even though the skills crisis has been downgraded to a skills shortage, demand for skilled labour remains high. Inevitably we’ll see inflation in pay rates. Further pressure on costs could come if the Uber employment ruling filters through to self-employed tradesmen.
There are also rumblings in the labour market. The unions have been flexing their muscles on Crossrail which has seen disputes over bonuses, and how far workers are expected to walk before they find a loo. No doubt the next batch of major infrastructure projects such as HS2 and Hinkley will become targets.
The early departure of Adrian Belton as chief executive at CITB demonstrates there is tension at the training agency. After 50 years there is still a skills shortage and the CITB faces a fight for its life as government introduces the new apprenticeship levy and the industry consultation takes on a wider process.
Any firms with a payroll of more than £3 million per year will contribute to the new levy through their HMRC submissions, and the money will be dished out by the Skills Funding Agency to anyone who takes on an apprentice – levy payer or not. CITB will therefore have to find a role in the new order to justify its continuing existence.
Despite the dark clouds of recession over the horizon, construction is a £100 billion industry employing two million, so there are still lots of opportunities for 2017.
Adrian JG Marsh