Kim Vernau, CEO of BLP Insurance examines the impact of the recent General Election result and what it means for the construction industry
Having successfully snatched defeat from the jaws of victory, Theresa May’s government has now recommenced the business of Parliament on a “confidence and supply” basis with the Democratic Unionist Party (DUP).
As the election result became increasingly apparent on Friday 9 June, there was a two percent drop in Sterling against the Dollar and the Euro early in the morning. By the end of the day, Sterling had rallied, and the FTSE 100 was up. House builder share prices were adversely impacted as questions were raised about the skills shortage in the construction sector, delays to Brexit negotiations and the loss of yet another Housing Minister, who had been viewed favourably by the sector. While it’s true the markets hate surprises, there are some positives that the construction industry can take away from the recent vote.
At the centre of this is that the fundamentals of the British political and economic system have not changed. Strong liquidity, stable governance requirements, transparency and clear title are all critical requirements for the “safe haven” status that the UK has traditionally held. These aspects will continue to be a focus for overseas investors in the UK property market.
The UK housing shortage
The housing shortage in the UK remains a critical issue for all generations. The basic requirement to build more housing of differing tenures has reached a crucial juncture. Private rent, affordable rent and social rental properties, together with Help to Buy, need to be built. This can only be achieved through a long-term costed plan that, in an ideal world, should be adopted by all parties. Indeed, all parties recognised the requirement for a significant increase in new builds in their manifestos.
All of these different tenures were considered as part of the solution outlined in the government’s “Fixing our Broken Housing Market” white paper. It is important that the government continues to engage with the sector through the consultations issued in the report and ensure the appropriate support is provided. While the Minister of State for Housing and Planning, Gavin Barwell, lost his Croydon seat in the election, he was subsequently appointed as Theresa May’s Chief of Staff. This may bode well for the housing sector as he will continue to have influence at the highest level.
Brexit
In terms of Britain leaving the EU, the message from the electorate was that it did not support a hard Brexit. The pledge to leave, regardless of a deal or no deal situation for the UK, did not win the Prime Minister many friends. It seems increasingly likely that there will be a transitional arrangement required, with the desire to remain as part of the single market and accept the movement of labour being a good thing for construction. Given the skills shortage facing the sector, highlighted by Mark Farmer’s Modernise or Die report, continuing to enable the free movement of labour is a critical factor to the success of the industry going forward.
Looking at infrastructure projects, there is a need for greater clarity from the government on its commitment to kick start and complete these crucial developments, both for the benefit of the wider economy and for the construction sector. A number of these projects remain politically sensitive, and any lack of certainty will have a negative impact on their continued progress.
Attracting new talent
We must continue to focus on attracting young talent to the sector, and retain that talent through education that encompasses the provision of apprenticeships and engages with innovation to harness efficiencies in resource and cost. These tools will support the sector and reflect the acknowledgement that a collaborative approach, across all parties involved in a construction project, is the way forward.
Getting on with the job
Issues facing the sector existed pre-election, and have previously been identified as requiring urgent attention to address challenges within the UK construction industry. With political change now underway following the unexpected election result, the question now is whether the government can strike an appropriate deal with the DUP and deliver some certainty for a sufficient period of time to help tackle problems seen as limiting the growth and success of the sector. It is incumbent on every one of us to play our part in working towards the resolution of these matters and, ultimately, to get on with the job.
Kim Vernau
Chief Executive Officer
BLP Insurance
kim.vernau@blpinsurance.com
This article was written prior to the Grenfell Tower tragedy.
