Post Election analysis – What does the result mean for construction?

Anthony Arkle, Skanska

HS2, HS3 and Crossrail 2 will all progress, says Skanska’s Anthony Arkle but don’t expect too much movement on a new south east runway.

After all the talk of potential constitutional mess and a number of permutations in terms of forms of government, we have been landed with a surprise and somewhat conventional overall majority. So what does that mean for the construction industry?

On the face of it, the new government, free from the shackles of governing with its partners, will be free to pursue its agenda as it sees fit. But actually, the Conservatives have a much smaller working majority than when in coalition. The majority of 12 could be whittled down through by-elections and backbenchers will become much more powerful and able to pursue their agendas on specific local issues. Coalitions will need to be formed on specific issues.

"I expect construction companies to be asked to voice opinions on EU membership – they will need to consider their position."

We will see this government push ahead with HS2, HS3 and progress plans for Crossrail 2 and there will be a response on the Davies Commission. The Lib Dems were firmly against expansion of the south-east airports, but, even with their influence much diminished, there is still likely to be opposition which will make implementing the Davies Commission very challenging. What is clear is that we need the new administration to move quickly, decisively and to commit to a long-term pipeline that contractors and investors need.

It will be really interesting to see how the new government responds to the popular Armitt Commission proposal, supported by Labour, which got the buy-in of many businesses. We will also be watching carefully to see if Infrastructure UK remains as it is.

One of the key features of the campaign was the absence of detail on exactly where the axe would fall in public spending.

With pledges for extra funding for the NHS, a promise not raise tax or VAT, and the Conservatives’ plans to eliminate the deficit sooner than those of others, we can only expect swingeing cuts to come from all unprotected departments. Those involved in the local authority space will see further fiscal challenges and there will need to continue to be a more collaborative approach.

Construction companies in the outsourcing world are likely to see more opportunity, although how much may depend on Matthew Hancock, Francis Maude’s successor at the Cabinet Office.

I am fully expecting the devolution agenda to continue. For me the big question is how and when fiscal devolution progresses. London will continue to push for this – it might be offered for individual projects such as Crossrail rather than wholesale devolution across city regions.

One of the key political issues over the coming year or two will be the EU referendum. Business will play a vital role in developing the narrative to stay in the EU.

The key issues for construction companies will be the uncertainty which could delay clients’ decisions in the run up to the referendum and the access to skills should the UK decide to leave. I expect construction companies to be asked to voice opinions on EU membership – they will need to consider their position.

So it’s a fascinating time all round -  a chance for the new government to push ahead and continue the work of the Coalition, but with plenty of challenges ahead.

Anthony Arkle is director of government affairs, strategic development at Skanska UK