Opinion

Data | Regional investment can be a tool for levelling up

Building construction capability in the regions will help with levelling up and create a more resilient industry, says Kris Hudson
Image: Dreamstime
Whitby in Yorkshire. Image: Dreamstime

After the recent local elections where metro mayors dominated the headlines, the government has promised a new levelling up white paper this summer to replace its mothballed one on devolution. When it lands, it is expected to articulate much-trailed plans to raise up regions beyond the South East by boosting investment.

Construction has a pivotal role to play in this levelling up process, as the government has chosen the built environment as one of the main investment areas for its new policy programme. Yet after years of solid output growth, the shock of the pandemic and the UK’s exit from the EU have taken a toll.

The Office of National Statistics (ONS) shows overall output is not far off reaching recovery, with Q1 2021 only down -1.7% compared with on pre-pandemic levels. But this is propped up by repair and maintenance, increasing by 6.4%, while the more significant metric of new work is -5.9% below its pre-pandemic peak. The challenge is getting back to these higher levels of new work output, strengthening the sector’s position and ability to support the government’s investment drive.

But where is most in need? While rhetoric focuses on North versus South, or South East versus South West, the latest quarterly construction output figures from the ONS hint at how disparate and complex the situation is.

Despite the variability of post-pandemic, non-seasonally adjusted regional output data, there is evidence to suggest that growth doesn’t always stick neatly to North and South labels. For Q1 2021 versus Q1 2020, Yorkshire & Humber saw growth of 11.5%, while its neighbour the North East fell -17.2%. Similarly, the South West saw growth while the South East contracted.

‘Levelling up’ is often used to mean narrowing the gap between London and elsewhere – and a gap isn’t in dispute, with output in Yorkshire & Humber still 39.4% below London. Yet the picture is diverse. For instance, within the North, the spread of output ranges significantly from £1,233m in the North East to £4,544m in the North West.

Policy would do well to address such intra-regional disparity – preferably with an integrated and targeted approach that stops areas being left behind. Supply chain growth must also match spending commitments. Left unaddressed, constraints on labour, skills and materials can contribute to cost-push inflationary pressures and hamper recovery as it takes a foothold. Whereas building capability and capacity in the regions will both help to deliver on levelling up and to create a more resilient and robust industry.

Kris Hudson is an economist and associate director at Turner & Townsend.

Story for CM? Get in touch via email: [email protected]

Latest articles in Opinion