NZ

Chinese Investment for the UK Construction Industry

China has become more invested in various industries of the United Kingdom, such as energy, transport, and infrastructure in recent years. In the construction sector, due to the risk involved, Britain has lacked proper investment for many decades, leading to the country being ranked 27th in the world, as reported by the World Economic Forum. However, according to the report by Pinsent Masons, Britain ranks third in the Global Infrastructure Investment Attractiveness Index, just after Japan and the United States.

Construction Post Brexit

Brexit has had immense ramifications in all industries of the UK, including infrastructure. The vote to leave the European Union means that Britain will no longer have the support of the European Investment Fund and the European Investment Bank. This is a serious blow to the construction industry, which suffered its worst performance in 7 years.

The vote to leave the EU has however had no effect on the employment rate, which has remained the same post-Brexit: 4.9%. The fact still remains that the UK’s construction industry went into recession after the Brexit vote and there is a huge need for investment to change the game of the “chronically underinvested” construction industry in the United Kingdom.

Tony Pidgley, the chairman of House Builder Berkeley Homes recently spoke out, warning of Brexit’s impact on construction workers, and pointed out that 50% of his subcontractors are from Eastern Europe. Mark Farmer author of Government skills crisis report stated the construction industry must “modernise or die.”

Chinese Money Set To Change the Face of UK Construction Industry

The Pinsent Masons report mentions that China’s estimated investment in the UK will be £30 billion by the year 2025. In this investment, half of it would be allotted to construction and the real estate industry. Specifically,

“A massive £105 billion of direct investment will be ploughed into infrastructure and real estate, £43.5 billion into UK energy infrastructure and £25.5 billion into UK transport and other infrastructure projects between now and 2025.”

The UK has a huge construction need, with long periods of underinvestment resulting in a catch up with other advanced economies (chronic underinvestment has created an infrastructure need close to £500 billion).  This direct investment by China could be transformative for the UK, helping the construction industry reach an international standard and help grow economic arteries such as Britain’s railways, airports, energy stations etc.

Challenges

  • With more investment the UK Government accelerates its house building plans, with the target of completing 200,000 homes per year. The biggest challenge the UK construction industry is facing is the skills shortage with an estimate that the number of homes built could fall to just 100,000 per year.
  • Attracting young talent into the industry to help bridge the skills shortage is a challenge with a tilt towards ‘digital high-tech engineering’ needed to create a more positive image