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The pros and cons of an infrastructure boost post pandemic

infrastructure boostThe UK Prime Minister has signalled a massive infrastructure boost to help the country’s economy to recover post pandemic.
The details and plans for allocation of money are likely to be fleshed out in the autumn but in a speech at the end of last month he indicated that more than £5 billion would be spent on infrastructure projects, many of them in northern and central England as part of his pledge to tackle the imbalance between London and the South and the more deprived regions.
The projects will include spending on hospitals, roads, railways and schools, including what are called “shovel-ready” projects to help businesses and individuals to recover and address the expected mass unemployment.
Business directors should be planning now to take advantage of the proposals, especially those in the construction and tech sectors that are likely to be recipients of the government money.
I know of at least one company, supplying a unique range of thermally efficient, environmentally-friendly products to house builders, which is already well-placed to grow post-Coronavirus to supply its Passivhaus compliant insulated foundation and walling systems.
The government initiative does however highlight some issues that are associated with ambitious plans that are announced without thinking them through.
In his speech, the Prime Minister promised to simplify the planning system and regulations to speed up the process.
Unless some thought and care is put into how the infrastructure boost is carried out there is a risk that the initiative will undo what little progress has been made to reaching promised environmental targets.
For example, while improving the road infrastructure is needed in some parts of the country, it is likely to increase the numbers of vehicles on the roads and in turn will contribute to an increase in CO2 emissions and global warming.
In fairness, the PM did also promise to “build back greener and build a more beautiful Britain” with a commitment to plant approximately 75,000 acres of trees every year by 2025. He does like his promises.
It may also be the case that ambitious infrastructure plans fail to meet the objectives of creating a large numbers of jobs. It is likely that businesses will be looking to find ways of reducing their dependence on labour investing in and more automation and technology-driven ways of working.
These are points highlighted by the economist Joseph Stiglitz who argues that there are infrastructure spending risks but also acknowledges that “well-directed public spending, particularly investments in the green transition, can be timely, labour-intensive (helping to resolve the problem of soaring unemployment) and highly stimulative”.
It is clear, however, that directors will need to find innovative ways of delivering the proposed infrastructure while at the same time also promoting their “green” credentials.
#infrastructureboost #economicrecovery #construction #techinnovation

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Construction is a UK economic growth sector – or is it?

There has been some evidence over recent months that the UK construction industry has not been growing as might be expected after a recession. Closer analysis reveals that this is not a uniform picture.
The larger companies involved in big commercial, infrastructure and house building were doing well but seem to have come off the boil recently. Many of the smaller, more local builders have been facing a number of ongoing challenges.
For building contractors the lead time between pitching for and pricing a contract can be lengthy, anything up to two years before a project gets under way. This means that prices quoted are likely to have changed significantly especially when they rely on sub contractors. In many cases this is leading to profit margins being eroded to such an extent that the tendered price is no longer viable.
For the smaller builders, who generally do private work such as extensions and building refurbishment, the issue is the high cost of VAT rates. While there are some aspects of such building work that are VAT exempt, this is a very complex area and usually it applies to development. Much of this is down to home owners who are still finding it difficult to borrow for extensions and refurbishment and their concern about justifying the investment unless it is an alternative to moving to accommodate a larger family.
Another issue for contractors is the availability of specialist sub contractors. The larger single-trade firms working for developers and larger construction companies seem to have more work than they can handle where their problem is finding skilled staff such that dependency on agency labour is eroding profits.
This lack of skills is the result of many skilled people having left the industry which in turn is driving up the cost of labour.
As a result the beneficiaries in the industry are the skilled sub contractors and specialist trades who are able to charge a premium due to the lack of competition.
Certainly anyone providing fixed price tenders needs to limit the time for acceptance so they have the right to reprice the work if there is any delay.