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2017 to be 'year of feast and famine' in construction sector

2017 to be 'year of feast and famine' in construction sector

The strongest parts of the construction sector in 2017 will be in the infrastructure area, while commercial demand will be lower than in 2016, an expert has predicted.

Speaking to Construction Enquirer about the year ahead, KPMG's head of infrastructure, building and construction Richard Threlfall predicted a significant shift in the balance of workloads.

He remarked: "Contractors in infrastructure will win more work as Government and utilities companies continue to spend heavily on road, rail and energy investments.

"Contractors who depend largely on commercial demand will see a decline in demand as corporates continue to delay investment decisions pending clarity on Brexit."

He added that there will also be "significant" regional variations, with Brexit acting to "gently deflate" the housing bubble in London, whereas the West Midlands is set to enjoy the benefits of HS2, with this stimulating investment in the region. 

Mr Threlfall added that there will certainly be plenty of jobs around, with a skills shortage set to be an ongoing issue that will feed into the Brexit-related debate about immigration. 

He said the good news on infrastructure is based a lot around the "three Hs" of Heathrow, HS2 and Hinkley Point, which the government has resisted calls to cancel. However, he warned that rising inflation may mean less buying power for consumers and thus less tax, which if Brexit also weakens the economy will mean less tax and thus possible delays in 2018 and beyond to other big infrastructure projects. This would include Crossrail 2, HS3 and the trans-Pennine road tunnel connecting Manchester with Sheffield. 

This pessimistic note may, however, be countered by the announcement by chancellor Philip Hammond in the Autumn Statement that a higher proportion of GDP will be spent on infrastructure. This may suggest that the government will go on spending heavily in this area in a neo-Keynesian effort to stimulate the economy through productivity gains and ensure any negative effects from Brexit are less pronounced.

Image: iStock


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