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Wednesday23 July 2014

Winter cheer

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It’s not all good news but at least the chancellor’s policies on construction have progressed

Sarah Richardson, editor of Building

George Osborne’s repeated assurance that “we are making progress”, the phrase with which he both opened and summed up Wednesday’s Autumn Statement, was perhaps not the most convincing or encouraging statement for a nation that will now see austerity measures extended to 2018. But for the construction industry at least, the chancellor demonstrated evidence of policy progression, and that will be welcomed with relief.

After two years of wrangling and months of false starts, the government has finally launched its new version of PFI (the snappily, but rather undramatically titled PF2). And in addition, the chancellor has continued to switch funds to capital projects, recognising that attempts to stimulate the industry and the economy through developing social and infrastructure facilities have to continue to give any chance of a boost to growth. The government took long enough to hear the message, but now this approach seems to be a mainstay of set-piece public spending announcements, which can only be good news.

The 18-month cap on procurement times will come as another sign of progress for those in the industry who have been dragged through bidding processes lasting two years or more

As ever, the devil will be in the detail, however. In the case of the PF2, while its launch is to be hugely welcomed, some potentially devilish pitfalls have already emerged which the government and those who work on projects funded through the initiative will need to take care to negotiate if the intended benefit of the new policy is to be realised.

The government’s decision to place an 18-month cap on procurement times will come as another sign of progress for those in the industry - and there are many of them - who have been dragged through bidding processes lasting two years or more. But already some within the sector have voiced concern at the potential liabilities for firms and investors if a project’s procurement is scrapped for exceeding this cap due to reasons beyond their control, and care needs to be taken in establishing clear guidelines to avoid a minefield of legal complications, or deterring bidders in the first place.

In addition, early analysis of the cost of PF2 deals suggests they could turn out to be more expensive for clients than before (see page 9). So the government needs to ensure that they do not become unduly unattractive to procuring bodies as a result. On top of this, of course, is the all-important imperative of actually attracting investors, and until the detail of the scheme has been absorbed, this has to remain a concern.

The £5bn switch from current to capital spending in areas such as schools, colleges, roads and hospitals is a far clearer cause for cheer, of course. Here, the challenge for the government is to get this money hitting the ground in the next couple of months, so that it can provide a boost at the start of a year widely predicted to be the toughest yet for the industry.

If that can be achieved, meaning the money can fill more of the current gap in workloads while the new form of private finance initiative beds down, then many firms in the industry would to be able to approach the new year with at least a modicum more optimism. And that, in a market worn down by tough times and uncertainty, would be a kind of progress
in itself.

Sarah Richardson, editor

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