Construction UK Magazine - April 2020

Page 10

Opinion Piece

HS2: EN ROUTE TO GROWTH After several years of political and economic uncertainty surrounding Brexit, SMEs throughout the country have undoubtedly faced challenging times, and the construction sector is no different. A recent IHS Markit/CIPS UK construction survey found that building activity in the construction sector fell at the secondfastest rate in over a decade. However, it’s not all doom and gloom. The turn of the decade has brought with it many opportunities for the construction industry; not only has the £106bn HS2 project been given the green light, but we have seen the Government commit to further investment in infrastructure across the country. It’s encouraging to see the Government is commiting to create better connections in northern regions while simultaneously closing the long-disputed divide between the north and south. With these promises and an increase in political certainty for the first time in recent memory, businesses, especially those in the construction sector, are feeling more confident than before to proceed with their plans for growth. The HS2 project, however, does not only mean good business for the large contractors working directly on the construction of the transport link; in fact, the entire sector will benefit. Small to medium sized firms will also have the chance to offer their services and HS2’s supplier engagement programme will help raise awareness about potential opportunities with businesses of all types. Additionally, those who are not involved directly in the project should not feel left out, as the void that is left behind from the other firms will need to be filled. Going beyond the construction sector, the development of the new north-south connection will also spawn new growth in hubs immediately surrounding the refurbished and soon to be built stations along the route - including new housing, retail and business developments.

New jobs will be formed to support this growth; with an estimated 25,000 jobs and 2,000 apprenticeships to be created directly linked to the route itself while approximately 100,000 jobs will be conceived associated with the surrounding developments. In total, half a million jobs are due to be generated during and after the project. This inevitable growth in small towns across the country will benefit the smallest of construction and development firms; further proving the approval of this project will play a vital role in the stimulation of the construction economy.

Businesses should be conscious that the volatility and risks associated with contracts in the construction industry contribute to the lack of appetite from high street banks to lend to these types of firms. As construction businesses begin to win contracts for the building of HS2, they will need to bear in mind some of the hurdles they may come across that will likely impact their business. This could include planning for increased overhead costs, having enough cash flow and headroom, negotiating sensible contracts and addressing payment issues (remedying them in a timely manner throughout the contract fulfilment rather than after projects are completed). Firms will need to look ahead and be conscious of their potential financial needs in these situations - preparing to access external funds where necessary to address potential shortcomings. Businesses should be conscious that the volatility and risks associated with contracts in the construction industry contribute to the lack of appetite from high street banks to lend to these types of

10 Construction UK Magazine - April 2020

firms. However, this is where alternative finance can come in to play, and firms should keep this option in mind when seeking external funds to support their endeavours. In order for HS2 to be completed successfully and on time, it is vital for construction firms of all sizes to have proper access to the right amount of funding when they need it. Alternative lending solutions are great options to accommodate any sort of endeavours construction businesses are looking to fulfill in this time of long awaited certainty; and thus firms are encouraged to look at all their options to ensure they are seeking the appropriate solution for them. As new tracks are laid, new station foundations are poured and each phase of HS2 begins to take its form across the country, the decision of the Government to proceed with such an important infrastructure for the entire country will soon show its benefits to the construction industry as a whole. This much needed and long-awaited boost in the sector is welcomed and its value is sure to be seen throughout the 2020s. By Ian Bath, Corporate Sales Director at Nucleus Commercial Finance.