Taking into account the results of our latest SME Growth Index, Chris Smith – Head of Specialist Equipment at Aldermore – discusses the potential impact that the new Labour government could have on the construction industry
The election of a new Labour government in the UK could bring transformative changes to the construction industry, presenting significant opportunities for growth, innovation and sustainability. With the industry currently grappling with challenges such as sustainability, supply chain disruptions, and financial pressures, a change in governmental approach to economic management, energy and infrastructure development could serve as a catalyst for positive change.
A green future
Sustainability is becoming increasingly crucial in construction. Despite 64 per cent of businesses not yet prioritising green transformation, there is enormous potential for progress. With only one in five (22 per cent) businesses currently measuring and reducing their carbon footprint, and one in four (26 per cent) adjusting supply chains for sustainability, there is a significant opportunity for growth in this area.
Labour’s commitment to tackling environmental issues remains with their aim to push for clean energy by 2030, and potential initiatives arising out of this could help construction firms accelerate their green transformation, positioning them at the forefront of a sustainable future.
Inflation and supply chains
Economic pressures like high inflation and rising energy costs have been significant challenges for the construction industry. We hope there will be a focus on stabilising energy prices and curbing inflation to offer much-needed relief. Increased public investment in renewable energy could not only lower costs but also create new business opportunities in ‘green’ construction.
Labour might also address supply chain delays by investing in domestic infrastructure and production capabilities. 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.
Tackling late payments
Financial stability is a critical concern for construction firms, with late payments posing a significant challenge. There is a need for the implementation of stricter regulations to ensure timely payments, which could improve cashflow and enable businesses to invest more confidently in growth and innovation.
Addressing these late payments could unlock substantial growth potential. With a third (34 per cent) of businesses currently delaying investments and 42 per cent missing growth opportunities due to cashflow issues, timely payments could empower companies to invest in new equipment, diversify their services and train staff more effectively.
Stimulating growth and expansion
Despite current challenges, the construction industry has shown resilience, with businesses reporting growth in revenue, headcount, and client base. However, this growth is still below the national average, indicating room for further expansion.
Labour’s pledge to build 1.5 million new homes on brownfield sites and urban areas is a positive indicator of new opportunities, driving demand for construction services and further boosting industry growth. What’s more, policies like their aim of establishing a National Infrastructure and Service Transformation Authority to oversee a 10-year strategy for infrastructure development could restore investor confidence and help stabilise the construction market. A 14 per cent increase in private housebuilding by 2025 is expected as a result of these plans.
In summary
The election of a Labour government offers the construction industry a promising opportunity to evolve and thrive. With a focus on sustainability, economic stability and growth, Labour’s policies could help the sector overcome current challenges and seize new opportunities.
By staying agile and responsive to these changes, construction firms can position themselves for a successful and sustainable future. Whether these promises can be delivered is another matter entirely, but it bodes well that the government is looking to make progress.
Asset Finance for the Construction Sector | Aldermore Bank
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*Research conducted by Opinium on behalf of Aldermore between 16-29 April 2024, covering 68 senior decisionmakers in the construction & building materials sector.
