Post Election political uncertainty affects business confidence - should we worry?

Marie-Claude Hemming
24 April 2015

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The outcome of next month’s General Election provides both opportunities and risks for the UK construction sector, says Marie-Claude Hemming, head of external affairs at the Civil Engineering Contractors Association

Our sector has finally emerged from the global economic crisis and is preparing to deliver vital infrastructure projects which will guarantee economic and social growth across the country.

But a poll of CECA members found that 67 per cent of construction firms are worried that a delay in forming a strong government could put this at risk.

"Historically changes in government have proved challenging for our sector, as incoming administrations often tear up the plans of their predecessors"

We know that political uncertainty affects business confidence, especially in the short term, and our concerns surround the durability of an incoming government and its economic plans. These concerns will also be felt by potential infrastructure investors, who will seek confidence over the future shape of the government quickly, to give comfort to them as they choose to invest into UK projects.

There are currently 227 privately funded and 124 joint public and privately funded projects within the current National Infrastructure Pipeline. While it is impossible to predict the outcome of the General Election, we anticipate if neither the Conservatives or Labour gained a majority, the resulting political uncertainty could damage investor confidence. Where this is the case, it is vital that a coalition or minority government is formed quickly.

On a more positive note, the same poll also showed that 45 per cent of contractors believe that an incoming government will commit the existing programmes of public infrastructure investment with only 15 per cent expecting committed spend to be pared back. Historically changes in government have proved challenging for our sector, as incoming administrations often tear up the plans of their predecessors.

"Looking ahead to the next five years the biggest challenge is meeting the skills deficit for the existing project pipeline."

Most recently we saw this in in cuts to UK public sector spending in the 2010 post-election emergency budget. In the roads sector alone we estimate that this cost around 10,000 jobs.

But perhaps tellingly, given experience, just under 40 per cent remain unsure what will happen to such spend under a new government. .

Looking ahead to the next five years the biggest challenge is meeting the skills deficit for the existing project pipeline.  82 per cent of CECA members polled believe that a cohesive plan for infrastructure skills should be developed.

Major programmes of investment in roads, rail and power networks are planned for the next few years, with the construction industry predicted to require 45,000 new recruits a year. Yet, one in five UK vacancies remain unfilled because of a poor skills base.

The last five years have seen a steady push from industry to improve the way infrastructure is managed through visibility of investment and workloads. This has created long term certainty, allowing for investment in skills, equipment and innovation, reducing delivery costs and making savings for the taxpayer.

But it is equally important that an incoming government recognises the importance to the market of maintaining long term certainty for, and fully commits to, the existing project pipeline.

Marie-Claude Hemming, is head of external affairs at the Civil Engineering Contractors Association