The new era of public spending

This year marks the 100th anniversary of the election of the UK’s first Labour government. Ruling with a minority government propped up by the Liberal Party, prime minister Ramsay MacDonald lasted less than a year before the Conservatives swept back to power. Despite the short spell in office, Labour’s administration did make one significant achievement – the Wheatley Act received Royal Assent in August 1924.

The act allowed central government to provide subsidies to build public housing, giving a boost to a depressed construction industry. Government housing subsidy continued to provide a lifeline for the sector during recessions for the rest of the 20th century.

However, this link was broken following the global financial crash of 2007-8. Instead of the government providing a counter-cyclical stimulus, the country entered a new age of austerity. Low mortgage interest costs and government loans to first-time buyers bolstered the market up to a point. But affordable housing subsidy was slashed and the industry was left more exposed to the vicissitudes of the housing market.

Then came Covid, and billions poured into businesses to keep them afloat. The depletion of public cash led to a further weakening of support for the construction sector. No longer was capital spending considered sacrosanct, and cuts were extended beyond day-to-day spending.

Here, transport has been the main victim, with business plans left in ruins by changed working patterns. The government’s ambitions do not stretch much beyond mending potholes.

However, our feature shows that all hope is not lost. While contractors can no longer rely on public housing and large transport schemes to get them through hard times, utilities work is set for a boom.

Privatisation is a controversial topic, and there are plenty of arguments against it. However, one advantage is that it is not subject to political whim or government fiscal rules. The water industry’s proposed £96bn spend for the next asset management period (for 2025-2030) is significantly higher than the current £51bn pot.

The replacement of ageing infrastructure may not be as glamorous – or provide the same economic return – as housebuilding programmes or high-speed rail, but it is set to provide a boon for the sector in coming years.

Meanwhile, there is plenty of work to be done in decarbonisation. The electricity network is being upgraded and expanded to meet the challenge of hitting net-zero goals. Alongside this work, fixing ageing energy pipelines cannot be delayed indefinitely.

We are on the cusp of a shift from the “Grand Projet” to the “Grid Projet”. The industry must adapt to the fast-changing infrastructure landscape in order to thrive.

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