Spring Budget 2024: private finance ever more crucial for construction
Well ahead of this week's Budget, the Government was carefully managing expectations regarding the scale of new public sector spending not just for the year ahead, but the foreseeable future.
With an election looming, the Chancellor, Jeremy Hunt, would have liked more financial headroom to balance personal tax cuts with spending on public services. He will now be hoping that his 2p tax cut for National Insurance will capture the public’s support in the coming days.
For the construction industry, the absence of infrastructure spending is significantly notable when we look back at the last decade.
The abrupt cancellation of HS2 north of Birmingham sends a clear political message that flagship programmes no longer dictate government policy. Investment is happening, albeit in less conspicuous ways.
Recent announcements such as the UK's National Infrastructure and Construction Pipeline by the Infrastructure and Projects Authority (IPA) is packed with schemes - £775bn of them. As the Chancellor was eager to point out, this includes redistributing the £36bn package of local transport upgrades constituting Network North as an alternative to funding HS2. £316bn of the pipeline is for energy infrastructure including nuclear at Hinkley Point C and Sizewell C.
The comparably small amounts of funding outlined in Jeremy Hunt's speech don't come close to these figures; the message they send instead is around intent.
With national finances under pressure, the onus on Government is increasingly to use its powers to broker and underwrite investment risk from the private sector. That includes in infrastructure, but also real estate sectors too.
The story behind the numbers was a £160m deal with Hitachi to acquire key sites for nuclear development, plus the announcement that Great British Nuclear will shortly be moving to the next stage of its Small Modular Reactor competition: that's a signal to investors that the UK wants to be seen as serious on clean energy generation. £650m with AstraZeneca in Cambridge and Speke for vaccine development and manufacturing: that's a move to show that the Government is keen to accelerate the growth of life sciences and advanced manufacturing sectors.
These schemes, creating employment and delivered well, can make a very major impact on the towns and cities where they sit - driving regeneration and renewal. Alongside new programmes, there is also an urgent need to improve existing assets in rail, road and utilities. These areas also form a major portion of the future construction pipeline.
The crucial factor behind projects and programmes of any scale, however, is skills - a word that only got two brief mentions in the Chancellor's speech. Attracting private finance, whether directly from private equity or pension funds, or through public private partnerships, relies on demonstrating that the UK has the expertise to manage that investment well.
That confidence hinges on a capable construction sector and we are already seeing soaring demand for expertise in specialist areas – from advanced manufacturing and data centres to nuclear commissioning and decommissioning.
We must keep making the case to Government for its support for education and training that builds the skills base in these areas, as well as investing ourselves in digital tools that accelerate team's capabilities.
If all goes to plan, this week's Budget will be the last before the general election and the industry will watch with interest for upcoming manifestos to understand how the policy agenda we've heard this week will evolve. There is also a real risk of inertia when - financially - whoever ends up in Number 11 Downing Street will have limited room for manoeuvre.
That is what we most need to avoid, because it is only through confidence and certainty that we can attract the investment the country needs.