Review of the construction landscape post-election
Martyn Stevenson, Associate, CMS Cameron McKenna Nabarro Olswang
THE recent election of the Labour Party in the UK has ushered in a new era of policy changes and legislative initiatives that are poised to significantly impact the construction industry. With a strong focus on infrastructure investment, green energy, and planning reforms, the Labour government aims to ‘get Britain building again’. I’ll look at some of the key proposals following Labour’s election success, highlighting the major legislative initiatives and their potential implications for the industry.
Labour’s infrastructure investment pledges
The Labour Party’s election campaign was heavily centred on infrastructure investment, with promises to boost both public and private infrastructure projects. The manifesto included several key pledges aimed at revitalising the construction sector:
Planning reform
With a strong focus on infrastructure investment, green energy, and planning reforms, the Labour government aims to ‘get Britain building again’.
Labour has committed to making changes to the planning system, including the introduction of mandatory housing targets. This is expected to streamline the planning process and accelerate the approval of new construction projects.
Green Prosperity Plan
Funded through an oil and gas windfall tax, this plan aims to promote sustainable development and green energy projects.
National Wealth Fund
This fund is designed to invest in strategic energy transition projects, with a focus on attracting private investment to complement public funding.
The Labour Party’s election campaign was heavily centred on infrastructure investment, with promises to boost both public and private infrastructure projects.
Great British Energy (GBE)
A publicly-owned clean energy generation company, GBE aims to drive the deployment of low-carbon energy sources such as wind, solar, and nuclear power.
The Great British Energy Bill
One of the most significant legislative initiatives introduced by the Labour government is the Great British Energy Bill. This bill outlines the creation of ‘Great British Energy’, a publicly-owned energy company headquartered in Scotland, now confirmed to be Aberdeen. The company’s mandate includes the production, distribution, storage, and supply of clean energy. The bill emphasises partnerships with the private sector to co-invest in leading technologies such as floating offshore wind, carbon capture, tidal power, and hydrogen.
Initially, GBE will focus on investing in onshore wind and solar projects, which can be built quickly and provide stable revenues. The company will take minority equity stakes in clean infrastructure and pursue joint ventures with the private sector. Over time, GBE may transition to managing and operating the projects it invests in, although this aspect of the company is expected to develop gradually.
The National Wealth Fund
Another key initiative is the National Wealth Fund, which aims to invest public money in energy transition projects. The fund has allocated £7bn for investments within the current parliamentary term, targeting areas such as port infrastructure, gigafactories, clean steel, carbon capture, and green hydrogen. The fund’s strategy is to take stakes in projects rather than issuing grants or loans, with the goal of attracting £3 of private investment for every £1 of public money.
Another key initiative is the National Wealth Fund, which aims to invest public money in energy transition projects.The National Wealth Fund is expected to play a central role in the government’s industrial strategy, addressing barriers such as energy costs, capital costs, and demand uncertainty. By providing financial assistance through debt or equity investment, loan guarantees, or financing, the fund aims to stimulate more activity and growth in the green energy sector.
Planning and Infrastructure Bill
The Planning and Infrastructure Bill is designed to unlock more housing and infrastructure projects across the country, supporting economic growth and environmental sustainability. The bill aims to streamline the planning process and increase the speed of major development projects. The National Infrastructure Commission has raised concerns that failing to accelerate infrastructure delivery plans could constrain economic growth and threaten climate change targets.
The Labour government has also hinted at merging the National Infrastructure Commission and the Infrastructure and Projects Council to create a new body overseeing certain projects. This merger aims to streamline planning and delivery by combining the expertise and functions of both organisations. The new body, likely to be called the National Infrastructure Strategy and Transformation Authority (NISTA), will set strategic infrastructure priorities and oversee the delivery of projects. NISTA will focus on four key areas: streamlining delivery, reinforcing government backing, ensuring scrutiny and transparency, and setting clear targets.
Challenges and future outlook
With a strong focus on infrastructure investment, green energy, and planning reforms, the Labour government has ambitious aims to revitalise the construction industry and drive economic growth.
Despite the ambitious plans and legislative initiatives, the construction industry faces several challenges. Early indications show that construction activity in July was down by about 20% compared to the previous year. Rising costs of materials and labour, coupled with a hardened insurance and bond market, have created a difficult environment for the industry.
However, there is hope that the market will experience a steady pick-up in activity throughout early 2025. The Labour government’s focus on providing financial guarantees and debt for certain projects could strengthen the industry, making financial institutions and private investors more confident in backing larger projects. If successful, these initiatives could lead to the growth that Labour has pinned much of its manifesto on. The key word here being ‘if’.
The election of the Labour Party has the potential to bring substantial change to the construction landscape in the UK. With a strong focus on infrastructure investment, green energy, and planning reforms, the Labour government has ambitious aims to revitalise the construction industry and drive economic growth. The real concrete evidence of this change won’t be seen in the short term and tangible benefits may take some time to see fruition. By that point any goodwill the new incoming government had may be in short supply.
Martyn Stevenson, Associate, CMS Cameron McKenna Nabarro Olswang