Election Uncertainty and the Construction Sector

The General Election looms in May, and in the light of recent promises put forth from all three of the major parties, we at Thatchers thought we'd break down the impact the election uncertainty is having on the construction and infrastructure industry.

The Main Impact

Election uncertainty is having a real effect on the industry – with the growth in total construction output predicted to slow to 4.2% by the close of 2015.

Whilst the current state of the construction sector is extremely strong, with private house building set to rise 10% by the end of the year, and commercial office construction set to increase by 8%, the results of this uncertainty will show towards the beginning of 2016.

Just over 96% of infrastructure firms argue that political uncertainty is a problem when it comes to investment, predicting a weaker demand for building projects. Despite the infrastructure sector being due to rise by 7.9% in 2015, pauses to contract awards and industry investment, alongside spending decision delays by clients, are predicted to make a big difference later in the year/2016.

Ultimately, the main product of this anxiety over election results is a slowing of growth rates, pauses to awards and decision delays.

Further Concerns

The promises made by the three parties has also thrown up a concern for the state of investment in construction and infrastructure.

Whilst Labour promised to boost housing rates to 200,000 a year by 2020, the Liberal Democrats have pledged to build more houses, and commission 5 new garden cities, and the Conservatives have promised to provide 100,000 starter homes, offered at 20% discount to first time buyers under 40.

If any of these promises are to be realised, significant private investment is needed (in both skills and manufacturing).

As interest rates rise, this investment will rapidly become essential to the continued growth of the construction and housing sectors. The fact that operation costs are rising – with subcontractor rates rising at the fastest rate in over 18 years – only adds to the necessity.

Short Term

Overall, with the construction and infrastructure sector currently expanding at its fastest rate in 4 month, the industry looks set to rebound from what some have termed "a temporary bump in the road".

Arguably, the results of the election will have many positive repercussions for the sector, and the results of this uncertainty will be short term.