At the height of lockdown, Business Secretary, the Rt Hon. Alok Sharma MP, wrote an open letter to the construction sector saying “I salute you for the enormous efforts you are individually undertaking to support the UK economy”. Government recognised the importance of construction, not least in that it provides 1 in 10 of Britain’s jobs. How has the Government followed up on its letter and what more can it do for the construction equipment suppliers represented by the Construction Equipment Association (CEA) is discussed by CEA Chief Executive, Rob Oliver.
A snapshot survey at the CEA’s 2020 AGM indicated that most members thought the UK equipment market wouldn’t deliver its post-Covid-19 recovery until the first half of 2021. Public pronouncements from major plant hire companies and contractors confirm that the squeeze is on capital equipment purchases whilst the uncertainties of Covid persist.
Here are 5 initiatives that the Johnson administration could consider to keep business out of harm’s way until the return to some sort of normality – or the much-feted “new normal”.
1. Keeping and providing jobs in construction
The latest initiative from the Construction Leadership Council, backed by the government, is the Talent Retention Scheme (TRS). This is a free service (up to April next year) to match those available for employment with job opportunities. This assumes that there is fluidity in the jobs market in terms of skills and geographic location. Available to all companies who have used the Jobs Retention Scheme is the Jobs Retention Bonus if they keep previously furloughed roles open into 2021. The bounty of £1,000 per employee is unlikely to make much difference to cash strapped companies for which 2021 seems a long way off. The challenge for government is to devise a mechanism to help the self-employed and micro-businesses that are the bedrock of the construction sector.
2. A future for apprentices
Covid-19 has resulted in the door being slammed shut to many would be new entrants into manufacturing and the wider construction industry. Anecdotally it seems a large number of excellent university graduates and apprentices will no longer be hired. These could be a permanent loss to an industry which has for a long time complained about the skills gap and the difficulty to recruit the right person for the right job. An encouragement to employers to keep apprenticeship places open would be to release the purse strings on the Apprenticeship Levy Fund. The levy collected a reported £2.8 billion in 2019 – of which only £864 million was spent. Rather than unused funds going back to the Treasury after 24 months, it could be possible to relax the rules for companies to drawn down grant on a wider range of qualifying expenditure in relation to their apprentices. Every little helps when it comes to keeping opportunities open for new recruits who will be needed in the years to come.
3. In search of an export strategy
In the most recent BEIS sponsored sector report, compiled by Knibb, Gormezano and Partners (KGP), it was confirmed that over 60% of UK produced construction equipment is exported. Conventionally a strong home market for manufacturers is the ideal springboard for overseas success. However, from a CEA perspective government policy on export promotion has drifted and lacked focus in recent years. Whereas the Department of International Trade (and its predecessors) offered modest grant support for official British Groups at overseas shows and trade missions in the past, these now seem rare for our sector. Focus is now on the elusive free trade agreement (FTA) with the EU – and a similar deal with the US. The latter is complicated by the continuing Boeing/Airbus dispute which has resulted in the Trump administration using its favoured blunt instrument of punitive tariffs which has involved a surcharge on certain categories of construction equipment shipped to the USA. The opportunity now is for the UK to set up a post-Covid-19, post-Brexit, export support programme to work with countries needing to get their economies back on track via much needed infrastructure projects.
4. Brexit – get it done, get it right
At the start of 2020, we thought getting the detail of our departure from the EU right was the top priority – as this transition year led to the new experience of a post-Brexit world in 2021. Whilst something else intervened, the clock is still ticking on the UK’s final day connected to the EU on 31st December 2020. The new relationship with the EU and the regularity framework with the rest of the world need to take shape very rapidly. It’s not just a case of getting “Brexit done”, but getting it right too. The CEA’s General Technical Committee is spending significant time and resource in gathering pieces to the puzzle of what UK/EU regulations concerning construction equipment will look like in 2021. There are a wide range of unanswered questions to which we are seeking answers. These vary from the application of the new UKCA mark (what does it really mean?) to the technical regulations in trading from and with Northern Ireland (and how these meet the conditions of the Northern Ireland Protocol).
A lot hangs on a successful outcome of the trade negotiations with the EU. The message to government is don’t leave it too late to get it done.
5. Building Back Better
Building Back Better is a great slogan as is the Boris Johnson’s “Project Speed” epigram. Both can mean a great deal to the construction equipment world. As promoted by the CEA, the government have committed to escalating the spend on infrastructure and relaxing (in an, as yet, unspecified way) planning laws. But the commitment to construction can go one step further as it can align with the increasing pressure to “go green”. Construction equipment performance and design has had a revolutionary decade as emissions have been slashed, machine monitoring has been radically improved and the potential for increased productivity taken a quantum leap. The challenge has been to get the newest technology embraced by the market place whilst margins remain wafer thin. A solution to this can be the introduction of a positive incentive to purchase the latest machines that will deliver future profits. With interest rates at an all-time low and a growing construction pipeline then government can provide the tipping point to invest in capital equipment. They did it in response to the 2008 financial crisis by introducing the scrappage scheme for motor vehicles. They can do it today by offering plant hire companies and contractors a financial incentive to get with the latest that construction equipment manufacturers can offer.