Forecasting in the construction industry: paying attention to politics
Every industry is affected by government policies and EU regulations, but the construction industry is perhaps the sector most impacted by politics. Housing, infrastructure and other developments are always hotly debated political issues. With the current housing crisis raising rent prices to increasingly unaffordable levels, the pressure is on the government to take action. As the general election nears, the parties must choose their battlegrounds. Housing and infrastructure projects will undoubtedly play a large part in this year’s election campaign. The manifestos will present a number of promises and policies that have the potential to affect the construction industry. With the results of the election far from certain, how much attention should construction companies pay to politics?
Help to Buy, the Green Deal and green energy subsidies have all impacted on demand in the construction sector. The construction companies that move quickest to take advantage of these new opportunities will perhaps see the largest benefits, but it’s certainly not worth putting all your eggs in one basket. These initiatives may not even last a year, let alone through an entire parliament or through multiple governments. Everyone in green energy production and installation knows how fickle government support can be. However, it is important to plan ahead and ensure that your financial forecasts take into account a sudden loss in government support or investment. Planning ahead is important in the construction industry, but few companies have the time to do so.
The general election
At the time of writing, the polls are neck and neck between Labour and the Conservatives. It appears likely that there will be another coalition government, and the Lib Dems or the SNP could effectively decide who makes it into power. There is also the chance of a rainbow coalition featuring the SNP, the Lib Dems, the Greens, and the Northern Irish SDLP. A minority government is also an option. What this essentially means is that parties will have to compromise, and won’t be able to stick to all of their manifesto promises. Even though exact policies won’t all be realised in government, the Tories or Labour (whoever forms a government) will be able to dictate the narrative. The Tories will continue to push 20%-off starter homes and help to buy schemes. Labour plan to introduce rent controls, increase housebuilding efforts and give local authorities borrowing powers. The Lib Dems are pushing new garden cities, but it is unlikely that they’ll prioritise this policy during coalition negotiations.
Infrastructure and regional investment
Even if the government (and the opposition) supports an infrastructure project, planning obstacles and public opposition can halt its progress and a later government may scrap it altogether. Be cautious in anticipating new infrastructure projects and the business they could bring, as they almost certainly won’t develop to their planned timelines.
Although we don’t know which parties will comprise the next government and infrastructure projects will inevitably run into delays, it is still important to be aware of politics, current events and the general public mood about housing and infrastructure. This will help you to anticipate and respond to demand.
Construction accounting software is a useful ally – not only during day-to-day operations, but also when planning for the future. Interested in upgrading to Evolution software? Contact the Integrity team to arrange a free demo.