A new year is just starting, but what will 2017 bring for contractors? According to KPMG Head of Infrastructure, Building and Construction Richard Threlfall, it will depend on which sector a contractor works in. Contractors in different sections of the construction industry will have very different experiences.
“2017 will divide the construction sector into winners and losers. 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,” said Threlfall
“We will also see significant regional variation. The West Midlands will benefit from the HS2 effect, which has already seen an uptick in investment into the region, while worries over Brexit will continue to gently deflate the London housing bubble.”
Regardless of the sector contractors work in, they will all face pressure due to the rising cost of materials and a potential lack of skilled labour if the Brexit vote ushers in curbs on immigrants from Europe. However, Threlfall was encouraged by the government’s commitment to London construction projects, such as Heathrow, and other major projects, such as Hinkley Point and HS2, despite calls to cancel all three.
But, rising inflation will mean the government receives less income from taxation and this in turn could lead to the delay of many major projects, such as the trans-Pennine tunnel and Crossrail 3. In addition, as household incomes are squeezed, the regulators may exert a downward pressure on utility investment.