The Brexit election

Rather sooner than most of us expected, preparations for a general election are in full flurry. Before the parties nail down their manifestos, we take a look at what construction might expect from June’s vote. Here, we report on the political context of the decision to call an election and look at what the parties are saying around the key demands of Building’s own Building A Better Brexit campaign

It’s more than 40 years since the UK experienced its last snap general election. Barely six months after the February 1974 election had resulted in a hung parliament, the Labour prime minister Harold Wilson called a fresh election against the backdrop of a recently concluded miner’s strike and soaring inflation. Since then, there has always been at least a four-year gap between general elections.
It’s a sign of the turmoil that has engulfed British politics over the last three years that the current PM Theresa May has announced a snap poll. So what impact will the election have on construction and what are the issues the industry wants politicians to address?

More certainty certainly

Despite Labour leader Jeremy Corbyn’s protests, the outcome of the general election is widely believed to be a foregone conclusion - the only real question being how big the Conservatives’ majority is going to be. May would then be able to refashion the Cabinet even more closely in her own image. Philip Hammond looks safe in his role as chancellor of the exchequer, having been one of the very few privy to the snap election announcement.
However Sajid Javid, who leads on housing as secretary of state for communities and local government, has been identified as vulnerable for the chop in a post-election Cabinet reshuffle following a series of missteps over the past year.

“The housing white paper got watered down quite significantly because Theresa May intervened which obviously isn’t a good indication,” says Martin Curtis, associate director at lobbying firm Curtin & Co, who was, until recently, also leader of Tory-controlled Cambridgeshire County Council.

I understand the importance of going into the Brexit negotiations with a bigger majority than she has got

Ann Bentley, Rider Levett Bucknall

Even if May retains the bulk of her Cabinet, there will be more churn in the government’s junior ministerial ranks, which is where many of the nitty-gritty decisions that affect the construction industry get made. New ministers, once in post, will need time to get their heads around their new briefs. Once they have, parliament will have broken up for its summer recess. The timing of the election means that many decisions will be put on ice until the end of the party conference season in October.

However, assuming that the election delivers the Conservatives the kind of majority indicated by current polls, the outcome will be much greater certainty thereafter, which is good news for the industry given the long lead-in times building projects require.

With a working majority of only 17, which could easily be eroded by by-elections, the government faced the constant risk of rebellions by its own backbenchers. The furore over the national insurance contributions for the self-employed illustrated the perils of a thin majority, says Ann Bentley, global chairman of Rider Levett Bucknall: “A relatively small number of MPs were able to get a Budget change which was almost unheard of.”

An enhanced majority will allow the government a freer hand to make decisions on infrastructure projects such as the third Heathrow runway, which has been stymied for years by worries about the electoral ramifications of the scheme in marginal west London constituencies.

Bentley says: “If we have five years of political certainty, it gives nearly six years to get stuff done. This is good because the one thing that the construction industry hates more than anything else is uncertainty. Five years of policy-making and implementation gives a bit of time for things to bed in.”

The only way is Brexit

Easing the Brexit process is May’s main driver for securing more MPs though. “I understand the importance of going into the Brexit negotiations with a bigger majority than she has got,” says Bentley. Richard Steer, chairman of Gleeds, agrees: “She will be able to return with a mandate for Brexit which will be very difficult to resist.”

But the end point of these negotiations, based on May’s position so far, is UK withdrawal from both the EU single market and customs union, extinguishing hopes nursed by many in the industry that Brexit will be reversed. Steer says: “We will be on our own with a shortage of labour because the Europeans working on building sites have gone home and we’ll have materials coming in with tariffs because of a hard Brexit.”

However, such has been the emphasis on finding a way to keep the 3.5 million EU citizens in the UK that many think a deal is inevitable and any labour shortages will come from a lack of migration after Brexit.

Curtis argues that with a bigger majority and extra time until the following election, May will be able to sideline those hardline MPs in her own party who are determined to pursue Brexit at any cost, even if that means no transitional deal. “It gives her the ability to be more flexible, if the negotiations aren’t going well rather than sticking to a hard line to keep the hard right happy,” he says. “She will have enough MPs behind her in parliament to be more pragmatic.”

Hold it right there: Election delays for construction

The calling of the poll at such short notice will cause planning headaches at a local level. When submitting their applications, developers tend to steer clear of election periods. The fear is that schemes will become political footballs.

“On larger and more sensitive sites they [committees] will have one eye on the ballot box,” says Martin Curtis, associate director at lobbying firm Curtin & Co, who thinks councils should take advice on how to proceed with any applications that the local MP has been involved with.

The election will of course mean delays at Westminster too. The announcement of Wave 13 of the free schools programme has already been delayed, for example, which will place pressure on the government’s target to open 500 of the parent-led institutions by 2020, says Marcus Fagent, head of education at Arcadis.

The Neighbourhood Planning Bill, which includes measures to ease the compulsory purchase process, looks likely to be passed but only after prolonged horse trading between the government and the House of Lords, where the Conservatives lack a majority.

They’ve got the power: Metro mayors

Last week’s snap general election announcement has overshadowed what was shaping up to be 2017’s biggest polls. In just under a week’s time, voters in six mainly urban areas of England will be voting for new so called “metro-mayors”. The successful candidates will be heading new combined authorities in greater Bristol, Cambridgeshire/Peterborough, Greater Manchester, Merseyside, Tees Valley and the West Midlands.

Labour’s Andy Burnham, Sue Jeffries and Steve Rotheram look set to win in Manchester, Tees Valley and Greater Liverpool respectively. Conservative candidates James Palmer, who is currently leader of east Cambridgeshire council, and Tim Bowles are favourite to emerge top of the races for the Fenland and West of England combined authorities. However, the contest in the West Midlands where ex-Waitrose chief executive Andy Street is leading the Tory charge against ex-Labour MP Siôn Simon, is seen as too close to call.

The nature of each combined authority’s powers varies depending on the deals local authorities concluded with the government when establishing them. But for construction companies working in several of England’s biggest conurbations, the new mayors will be big players with powers and devolved funding over areas like transport. The mayors will also have a big say over how
the Homes and Communities Agency distributes its budgets within their localities, although they will not have direct control of the purse-strings, unlike in London.

In each of the six combined authorities, apart from in Cambridgeshire/Peterborough, the metro-mayor will have the power to create a spatial plan, like that covering Greater London.

“The advantage of mayors is that one person is directly elected who can consider the roles that the different parts of those areas can play,” says Paul Swinney, principal economist at the Centre for Cities think tank. “If the mayors do their jobs properly, their influence will extend into areas where they don’t have hard powers.”

Mike Leonard, the chief executive of the Birmingham-based Building Alliance, sees the creation of the combined authorities as a “great opportunity” for construction. “We need clear leadership and joined up thinking particularly around the West Midlands. We’ve got HS2 but the danger is that our businesses lose out to London at a time when that market is going off the boil.”

However, unlike their counterpart in Greater London, the metro-mayors in other parts of England won’t be able to call in planning applications and thus over-ride decisions by local councils. Added to that, the mayors will be answerable to a Cabinet made up of the leaders of the councils in their areas, and they’ll need to secure a two-thirds majority to implement their decisions.

The potential for gridlock is clear, for example, in the West Midlands, where Street could be facing mainly Labour-run council leaders on 5 May, warns Swinney: “If they can’t get local authority leaders on board, they will struggle, which could be a real barrier.”

What the parties say on key points in our Brexit manifesto

Reader feedback to our Building a Better Brexit campaign has been that industry and government need to work together to create the conditions under Brexit in which construction can continue to operate and even hope to thrive. Responding to this, last month we launched a manifesto of eight recommendations for government, along with some key pledges that we are asking readers to commit to in return. The measures are designed to help the industry - and the country - be successful during the transition period and well beyond our exit from the EU. So where do the parties currently stand on these eight points that are so crucial for the industry?

1. Re-classify the construction industry from a “low priority” to a “high priority” sector in the Brexit negotiations
The government notoriously described construction as a low priority sector, according to draft negotiating documents which were leaked to The Times newspaper last November. Labour’s housing spokesman John Healey criticised the government’s position in a tweet. The sector’s low priority in the government’s eyes was subsequently confirmed in the Brexit white paper, which identified financial services and network industries, such as transport and communications, as its key priorities in the upcoming negotiations.

2. Ensure tariff-free and barrier-free access for all construction product imports and exports with the EU for a transitional period of up to five years
In recent comments Theresa May has edged towards a public acceptance that a transitional trade deal between the EU and the UK could be on the cards if, as almost universally expected, a comprehensive agreement cannot be agreed by the end of the Article 50 process. A speech this week on Labour’s approach to Brexit by Keir Starmer, shadow secretary of state for exiting the EU, says the party would seek “strong transitional arrangements”. Starmer also said Labour would negotiate with a view to achieving continued tariff-free trade and regulatory alignment between the UK and the EU, as well as “no new non-tariff burdens for business”.

3. Work with the construction sector to put in place a clear, robust system for training future UK workers
The government has recently introduced an apprenticeship levy, which is designed to make firms invest in training their workers, which will cover construction along with all other industries. This is designed to fulfil the government’s aim to create 3 million apprenticeships by 2020. Labour leader Jeremy Corbyn recently pledged that his government would make all companies bidding for local and national government contracts provide training and apprenticeship opportunities. In its recently published education policy paper, Labour said that it was important to ensure apprenticeships offered good quality training.

4. Confirm the rights of skilled construction tradespeople and professionals from the EU who are already legally working in the UK
The Conservative manifesto will end free movement of labour between the EU and the UK, according to press leaks following the snap election announcement. However, communities secretary Sajid Javid pledged during last October’s Conservative conference that the UK’s doors would remain open to builders from other parts of the UK in order to plug the skills gap in the UK’s housebuilding sector. Then in March, the immigration minister Robert Goodwill hinted, when giving evidence to the House of Lords economic affairs select committee, that migration policy could be tailored on a sector-by-sector basis. Labour’s Kier Starmer said his party’s manifesto would include a pledge that EU nationals currently living in the UK will see “no change in their legal status as a result of Brexit”.

5. Guarantee freedom of movement for key skilled tradespeople and professional architects and engineers, at least for a transitional period, and for any new immigration system to allow as near frictionless movement for these key workers as possible
The Liberal Democrats have defended the principle of free movement of labour in line with the party’s stance that the UK should remain a member of the EU single market.

6. Retain mutual recognition of professional qualifications in the industry with EU countries
None of the Westminster parties have yet drilled down into detailed areas such as the ramifications of issues such as mutual recognition of professional qualifications.

7. Commit to greater spending on construction of public projects in housing, infrastructure, schools, hospitals and other public projects, through both capital funding and PF2, to counteract market volatility, giving the sector a clear pipeline of work that will benefit the UK economy
At last year’s autumn statement, the Conservatives announced that up to 1.2% of national income should be earmarked for projects recommended by the National Infrastructure Commission. In the same announcement, the government unveiled £3.4bn worth of housing subsidies and funds for infrastructure projects to pump-prime development sites. Labour has pledged to invest £500bn into infrastructure, including transport, schools and hospitals via a national investment bank which would be funded by issuing government bonds.

8. Work with private sector clients to establish best procurement practices in order to develop more efficient bidding processes for public sector contracts
Housing and construction will be the first areas to be focused on by the cross-party Red Tape initiative, which has been set up to vet EU regulations which can be scrapped once the UK has withdrawn from the EU. The initiative, chaired by the Tory former Cabinet Office Sir Oliver Letwin, is due to begin its work in June. Starmer has said Labour would replace the Conservatives’ Great Repeal Bill with an EU Rights and Protections Bill to safeguard existing EU regulations, including those governing environmental protection.

Please register your support for our manifesto. The more supporters we have, the greater influence we can wield with the political parties.
To register your support, go to: building.co.uk/brexit

 

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