Burnham government: what should construction watch for next?

BCIS chief economist Dr David Crosthwaite on what the new Cabinet’s early decisions could mean for construction.

Andy Burnham is in as Prime Minister, John Healey is Chancellor, and Angela Rayner is back in Housing. For construction, one of the sectors most dependent on long-term policy commitments and investment, the coming weeks should provide the first indication of how the new government’s ambitions will translate into economic policy.

The latest data on activity and demand levels, tender prices and construction cost inflation all suggest a sector still waiting for clearer direction, making the new Cabinet’s early decisions perhaps even more consequential than usual.

The first thing to establish is whether Healey’s appointment represents continuity or change. He inherits Rachel Reeves’ fiscal rules, but whether he keeps them unchanged or chooses to revisit them will be one of the clearest early signals of the government’s intended direction. As Defence Secretary, Healey oversaw the recent Defence Investment Plan, which set out an additional £15 billion in Ministry of Defence spending over four years, funded in part by a 1% capital budget contribution from all departments and additional contributions from the Department for Transport and the Department for Energy Security and Net Zero.

This raised serious questions in the sector about whether construction and infrastructure investment would become the sacrificial lamb for higher defence spending. Redirecting funding away from road and energy infrastructure is difficult to reconcile with the government’s growth ambitions. Whether Healey takes the same approach from the Treasury, or a different view now that he is responsible for balancing spending across all departments, should quickly become clear.

Markets have so far welcomed greater political clarity, but relief that uncertainty has ended is not the same as confidence in future policy. Construction should be cautious about reading too much into an initial market reaction. The more important question is how quickly that political clarity turns into decisions that allow projects to move forward.

Housing is likely to provide the clearest early test. Rayner’s return as Housing Secretary brings experience back into one of construction’s most important departments. Burnham has said his proposed 10-year plan will include the biggest programme of council housebuilding since the post-war period alongside an enhanced programme of English devolution. Whether the Treasury backs those ambitions with sustained funding and long-term investment will be a key early indicator of how closely economic policy aligns with the government’s wider objectives.

With housebuilding activity still subdued against a challenging economic backdrop, no single intervention is likely to transform delivery on its own. The sector will be watching closely to see which levers the government chooses to pull first, as well as its attitude to the 1.5 million new homes target that was introduced by Rayner during her first term in the post.

A wider institutional question sits alongside this. Burnham has placed devolution at the centre of his programme, arguing that more decisions should be taken closer to the communities they affect. Recent NAO analysis⁽¹⁾ on English devolution points to potential benefits for long-term planning and value for money, but highlights continuing tensions between Whitehall’s responsibility for public spending and the ambition to give local leaders greater autonomy.

For construction, the success of enhanced devolution is likely to depend not simply on transferring powers, but on whether local and combined authorities receive the support, flexibility and accountability needed to actually plan infrastructure and housing investment over the long term.

Of course, financial markets and the construction sector are not necessarily looking for the same things from the new Cabinet. Markets often respond to tone and signalling, whereas construction responds to funding visibility, planning reliability and demand conditions that take much longer to shift. The next month is therefore likely to be more revealing than the first few days, as early statements begin to translate into policy priorities.

If the government’s proposed 10-year plan is to provide the clarity the industry needs, it will need to be backed by long-term funding commitments, infrastructure investment and a clear pipeline of work. Those overarching commitments, beyond individual appointments, are what construction will be watching for in the weeks ahead.

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^{(1)  National Audit Office – Devolution in England: funding and accountability – here}