CONSERVATIVES IN CONSTRUCTION: How would a Conservative administration treat architects and the construction industry? Exclusive extracts from a major report from industry analysts Glenigan
There is no doubt that regardless of which party assumes office following next year’s General Election, the lingering recession and the dire state of public finances will inevitably have severe consequences for the construction industry over the next Parliamentary term.
Though parts of Conservative policy towards the built environment may on the surface seem incomplete or uncertain, upon close inspection it is possible to forecast how an assumed Tory victory at the polls will affect construction both directly and indirectly.
From the industry’s perspective, the two crucial points of the Conservatives’ agenda are their preference for spending cuts over tax hikes, and their focus on smaller, delegatory governance. Flagship sources of work for construction, such as Building Schools for the Future and Crossrail, are unlikely to be scrapped completely but instead will almost certainly be reappraised, altered and trimmed in order to find savings towards reducing the Budget deficit.
A Conservative government will also look to give private funding a far bigger role in education and social housing
However, the prioritising of ‘frontline’ public services is likely to come at the expense of capital investment. This is likely to be particularly true in the health sector, with the Tories set to encourage hospitals to seek private finance for projects in many cases, leaving public funds primarily for day-to-day operations.
A Conservative government will also look to give private funding a far bigger role in education and social housing. Tory policy on public sector work is therefore partly dependent on the flow of private finance improving; whether its £50bn temporary National Loans Guarantee Scheme will achieve this remains to be seen.
Continuing this theme of smaller government, the party’s intentions to overhaul regional planning and potentially transfer more powers to councils or sub-regions represent a mixed bag for construction.
While streamlining planning and localising power may be beneficial long-term, it is feared that the immediate consequences will be a lack of mechanisms to enable major region-wide projects to get going, while local authorities’ likely focus on frontline services will see many ditch capital investment if they are able to.
This focus will also dent prospects for routine repair and maintenance contracts, as such work is typically funded from departments’ and local authorities’ current budgets and will therefore have to compete with frontline resources.
The outlook for construction under an assumed Conservative government is not, however, universally gloomy. The infrastructure and utilities sectors are likely to remain areas of significant activity. Though opposed to runways at Heathrow and Stansted, the Tories have voiced support for a multi-billion pound high-speed rail network and expansion of regional airports, while the current Government’s emphasis on pressing on with nuclear and renewable energy will also be maintained.
Indirect support for the industry should emerge from Conservative fiscal policies. Proposed cuts to the main rate of corporation tax to 25p and a 20p rate for small businesses will boost smaller contractors, as will a six-month deferral of VAT bills and a pledge to reduce corporate regulation by 5 per cent. Measures such as the scrapping of stamp duty for first-time buyers should also help lift the crucial private housing sector.
Though specific Tory policies are not expected to directly impact upon private non-residential activity, if the party’s economic strategy is successful in reducing the deficit while enabling private sector-led growth, the industrial and commercial property markets should benefit from increased demand and investment.
Though painful cutbacks in the context of continuing economic hardship are unavoidable, the future under a potential Conservative government is one of readjustment as well as retrenchment. While many previously buoyant areas of capital investment will certainly be squeezed, the Tories remain set to provide qualified support for construction across a number of key sectors.
First published in the Glenigan report Building a Conservative Britain. The report is available now for £795+VAT
AJ subscribers can buy the report at a discount of £100 - simply click Buy Now, then enter the code AJ offer and click on Recalculate