Four ways the UK’s new government could impact the construction industry

Following the results of our latest SME Growth Index, Chris Smith – Head of Specialist Equipment at Aldermore – discusses the potential impact a new Labour government could have on the construction industry

The election of a new Labour government in the UK could bring transformational change to the construction industry, presenting significant opportunities for growth, innovation and sustainability. With the industry currently facing challenges such as sustainability, supply chain disruption and financial pressures, a change in the government’s approach to economic management, energy and infrastructure development could serve as a catalyst for positive change.

Green future

Sustainability is becoming increasingly important in construction. Although 64 percent of businesses are not yet prioritizing a green transition, there is huge potential for progress. With only one in five (22 percent) currently measuring and reducing their carbon footprint and one in four (26 percent) adapting their supply chains to be sustainable, there is significant opportunity for growth in this area.

Labour’s commitment to tackling environmental issues is aligned with its target to transition to clean energy by 2030. The potential initiatives that arise from this could help construction businesses accelerate their green transformation, putting them at the forefront of a sustainable future.

Inflation and Supply Chains

Economic pressures such as high inflation and rising energy costs have been a major challenge for the construction industry. Hopefully, the focus will be on stabilizing energy prices and containing inflation to provide much-needed relief. Increased public investment in renewable energy can not only reduce costs but also create new business opportunities in green construction.

Labour could also tackle supply chain delays by investing in domestic infrastructure and manufacturing capacity. This would reduce reliance on international suppliers, making the supply chain more resilient and reliable. Such improvements could streamline operations across the sector, helping businesses meet project deadlines more effectively.

Troubleshooting Late Payments

Financial stability is a critical issue for construction companies, and late payments are a major challenge. There is a need to implement stricter regulations to ensure timely payments, which could improve cash flow and allow companies to invest with greater confidence in growth and innovation.

Addressing these delayed payments could unlock significant growth potential. With a third (34 percent) of businesses currently delaying investments and 42 percent missing out on growth opportunities due to cash flow issues, prompt payments could enable businesses to invest in new equipment, diversify services and train staff more effectively.

Stimulating growth and expansion

Despite the current challenges, the construction industry has shown resilience, with businesses seeing growth in revenue, employee numbers and customer base. However, growth is still below the national average, indicating room for further expansion.

Labour’s commitment to build 1.5 million new homes on brownfield and urban sites is a positive indicator of new opportunities, driving demand for construction services and further stimulating industry growth. Furthermore, policies such as the target to establish a National Infrastructure and Services Transformation Authority to oversee a 10-year infrastructure strategy could restore investor confidence and help stabilise the construction market. As a result of these plans, private sector housing construction is expected to increase by 14 per cent by 2025.

To sum up

The election of a Labour government offers the construction industry a promising opportunity to grow and flourish. By focusing on sustainability, economic stability and growth, Labour’s policies can help the sector overcome current challenges and seize new opportunities.

By remaining flexible and responsive to these changes, construction companies can position themselves for a successful and sustainable future. Whether these promises will be fulfilled is another matter, but it bodes well that the government is keen to make progress.

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*Research conducted by Opinium on behalf of Aldermore between 16 and 29 April 2024, covering 68 senior decision-makers from the construction and building materials sector.