100 days of Labour: have they stuck to their manifesto?
October 2024Just over 100 days ago, Labour entered government following a successful campaign and landslide victory. At the time, we examined the Labour Party’s manifesto pledges, focusing on the key opportunities and impacts they could bring for the infrastructure, construction, and energy sectors. A link to that article can be found below.
As we’ve reached the 100-day mark, Ian Masser, Kayleigh Rhodes, and Joseph Roberts now examine whether Labour has followed its initial manifesto pledges, outline what change has materialised, and consider the potential future impacts under this government.
Construction
Shortly after coming to power in late July 2024, the Chancellor announced important points concerning infrastructure projects in light of a significant shortfall identified between tax and revenues coming in and anticipated infrastructure spending. Several projects were considered for reduction, postponement, or full cancellation, reportedly including the Restoring Your Railway projects outside of Northumberland and Camp Hill and HS2 Euston. Other reports flagged that the New Hospital programme and Lower Thames Crossing were also being reviewed for postponement. As a result, infrastructure spend, programme, and associated decision-making could impact ongoing and future contracts between parties. We continue to recommend that parties carefully check associated contractual provisions and understand the position regarding any phased projects or approvals, and suspension or termination of contracts and appointments.
Moving on to more recent developments occurring within the first one hundred days, the much-anticipated Phase 2 Report from the Grenfell Tower Inquiry was released on 4 September 2024. The Report condemned the actions of many parties involved in the refurbishment of the Grenfell Tower. Various recommendations were made by the Inquiry as part of the Report which include, amongst other things, establishing a new single construction regulator, appointing a new Chief Construction Advisor, consolidating fragmented government fire safety responsibilities and reviewing and amending the current law and statutory guidance. This includes the definition of a Higher-risk Building and Approved Document B. You can find a more detailed summary of the findings and recommendations in Beale & Co’s earlier article here. You can also visit our “Digesting the Grenfell Report” hub for more information on how the Report may impact the construction and engineering sector and the future of building safety in the UK.
Energy
One of Labour’s big pledges was to set up a publicly owned clean power company (Great British Energy). On 25 July, Labour put forward a Bill to make this happen. At the time of writing in early October 2024, the bill had finished the Committee Stage in the House of Commons. Beyond the high-level summary below of what Great British Energy will aim to do, the detail is yet to be set out. As part of the legislation, the Secretary of State must prepare a statement of strategic priorities which will direct what Great British Energy will do and when, and this statement will be laid before Parliament.
The Government has published five key functions for Great British Energy:
- Project development – leading projects through development stages to speed up their delivery, whilst capturing more value for the British public;
- Project investment – investing in energy projects alongside the private sector, helping get them off the ground;
- Local Power Plan – supporting local energy generation projects through working with local authorities, combined authorities, and communities;
- Supply chains – building supply chains across the UK, boosting energy independence, and creating jobs; and
- Great British Nuclear – exploring how Great British Energy and Great British Nuclear will work together, including considering how Great British Nuclear functions will fit with Great British Energy[1].
As the bill is still in its early stages with many procedures to come, we are yet to see the reality of how it will take shape and be implemented in practice. However, it appears the items covered in Labour’s manifesto remain and the future resilience and sustainability of power continues to be an area of focus. It is possible that several of the above items will create future commercial and economic opportunities, including for those working in the infrastructure and energy sectors.
Keeping on the topic of energy, in line with Labour’s promise to decarbonise British electricity, the last UK coal plant at Ratcliffe-on-Soar, near Nottingham, has closed marking the end of 142 years of British coal power[2]. Labour consistently pledged to position nuclear power as a tool to aid the acceleration of decarbonising British electricity. Although efforts have been made to get this moving, the Sizewell C nuclear project has reportedly experienced fresh delays in its private financing, with an agreement with private investors not expected to materialise until mid-2026. In addition, since steps have been taken to actively move the project forward, the cost to the taxpayer is also being highlighted. Based on available information we understand that the French state-owned company EDF, is expected to split funding with the UK Government and jointly cover 20% of the estimated £20 billion the project is expected to cost[3].
When looking at the other promises around nuclear, the Wylfa site is rumoured to be incurring some issues. Energy Secretary, Ed Miliband, is considering scrapping the plans which may be due to the increased costs at Sizewell C and the difficulty in securing private investment. With the Labour party under pressure to take proactive and meaningful change in all areas, and an alleged £20 billion black hole in the public finances, projects like this could be the first to come under pressure[4].
As previously indicated, Labour appears to remain committed to reducing oil and gas output from the North Sea. One of the ways we previously discussed this could happen is via changes to the taxing structure. From November 2024, companies will now pay 78% tax as there is an increase in the associated energy profits levy. According to energy consultants Wood Mackenzie this could halve production by 2023[5].
Transportation
In a positive step for rail, HS2 appears to have potentially been given a new lease of life following a consortium reportedly setting out a proposal for a HS2 Phase 2 alternative (a new 80km rail line, referred to as the Midlands-Northwest Rail Link). Just a few days after this, on 18 September 2024, rail union bosses accepted a pay deal that will see the end of more than two years of strike action, which has caused major disruptions across the country at the busiest times of the year. This pay deal increases the average pay for a member of the rail Delivery Group to £69,000 in 2024/25[6]. With money being spent on pay rises and a reallocation of capital across government departments, it may mean rail projects with a large capital outlay or without an urgent or strategic demand are pushed back in terms of programme.
Key changes and bills announced to date, related to the Department for Transport, include:
- Passenger Railway Services (Public Ownership) Bill: Law aimed at improving railways by reforming rail franchising and bringing train operators into public ownership (see manifesto). At the time of writing, this Bill has just completed its second reading in the House of Lords.
- High Speed Rail (Crewe to Manchester) Bill: Drives further economic growth, rail connectivity and services across regions and the North of England. At the time of writing, this Bill is at the Committee stage in the House of Commons.
Legislative changes
In addition to the recently recommended changes to the Building Safety Act 2022 mentioned above, we have had sight of the July 2024 King’s Speech: the main items to note relevant to the construction, infrastructure and engineering sectors were summarised in Beale & Co’s update. The forty bills announced covered various issues across the themes of ‘Economic Stability and Growth;’ ‘Great British Energy and Clean Energy Superpower;’ and ‘National Security and Serving the Country’, as well as investment, planning and the environment.
Investment plans
The creation of a National Wealth Fund (“NWF”) was central to Labour’s aims to have a clear industrial strategy, deliver growth, and to create a greener economy and energy system. The NWF seeks to attract and mobilise additional private sector investment, estimated to reach billions of pounds from investors and businesses, and would align with the British Business Bank and UK Infrastructure Bank.
The use of Private Finance Initiative (“PFI”) was recently floated as an area of focus for Labour: i.e., the investment needed in sewage and water treatment. The Chancellor indicated at the Labour Party Conference that tens of billions of pounds of private sector investment would be used, sparking rumours of new modified PFI contracts. Further fuel was added to the rumours when the Chancellor discussed using the method for new schools and hospitals[7]. However, Labour have reportedly been warned by the head of the National Audit Office that this comes with risks, especially where infrastructure is returned in poor condition[8].
In parallel, we are in a period where parties are looking at existing PFI contracts and any review, handback or contract expiration/termination processes. More recently, there were calls to reset PFI models from the Association of Infrastructure Investors in Public Private Partnerships. For instance, this was hailed as a way to enable public sector managers and companies to take action or settle disputes or claims on contracts without having to resort to alternative or formal dispute resolution methods. Others in the industry have suggested that the use of PFI may negatively impact future UK investment. This is therefore an area to continue to watch within the industry. The terms of any related opportunities or contracts should also be carefully considered by parties.
Planning and Infrastructure
The UK’s planning regime was historically considered as overly complex, long and slowing economic growth. The Planning and Infrastructure Bill was promoted earlier this year to help accelerate and get the country building via streamlined and modernised planning reforms, changes to the compulsory purchase compensation regime, and in the approach to the delivery of housing, infrastructure projects and critical programmes, including renewable energy and upgrading the national grid. Labour also indicated plans to seek sustainable growth by prompting investment in industry, technology, and skills.
Environment, energy, and climate
As briefly noted above, Labour recognised the climate challenge and committed to a clean energy transition aimed at creating resilience and lowering energy bills over time.
Additionally, the Water (Special Measures) Bill was introduced to strengthen the powers of the water and environmental regulators to improve water quality and hold the companies to account. In the run up to the election, Labour had indicated that it would seek to clean up the UK’s water systems and plan for new powers to block the payment of bonuses to executives and bring criminal charges against persistent law breakers. Following the election and King’s Speech in July 2024, the Government’s intention to introduce the Bill and deliver on its manifesto commitment was declared [9]. Further, a policy statement released on 5 September indicates that the Bill will drive meaningful improvements in the performance and culture of the water industry and is viewed as a key step in enabling wider, transformative change across the water sector. In practice, we may see water companies seeking to pass on risk for such liability to their supply chain, for instance in terms of the design, construction, maintenance, and operation of water infrastructure assets. We may also see enhanced requirements, performance metrics, and associated indemnities in construction contracts and professional appointments to the extent permitted at law. Finally, we have recently seen reports of high fines being considered and levelled at water companies over historic sewage spills, and it will be interesting to see how these develop in line with legislative changes.
Concluding remarks
There have already been calls for the Government to respond to market issues, including the availability of work and resources (i.e. planners, construction workers, and apprentices), insolvency risks and important construction industry change. Of the new legislative bills announced on 17 July 2024, roughly a quarter had a connection with planning, the built environment, energy, transport, and the environment. The content of the King’s Speech and Briefing confirmed Labour’s future approach to stimulating the economy and creating investment and growth. Change remains on the horizon and there will be opportunities and risks for consultants, contractors, and industry professional bodies to be alive to and manage as a result. Being ahead of such items will help companies, their directors, professional advisors and representatives, to remain competitive and compliant with an evolving legal and regulatory landscape.
With constant news reports over the leadership, and arguably the most important fiscal day in any political parties’ year approaching (namely the Autumn Budget) there is a lot that can still change. Beale & Co will therefore continue to reflect on key industry developments under Labour in the future, so keep an eye out for further updates. Should you have any questions on the items covered in this update and how it might apply to your practices or contracts in the meantime, please contact your Beale & Co contact or the authors.
[1] Great British Energy Bill overarching factsheet – GOV.UK (www.gov.uk)
[2] UK to close last coal power station after 142 years – BBC News
[3] Sizewell C nuclear project hit by fresh delays as investment talks drag on (ft.com)
[4] Government considering scrapping Wylfa plans and 24GW nuclear capacity target | New Civil Engineer
[5] North Sea output to halve by 2030 under Labour tax proposals, warns report (ft.com)
[6] Train drivers accept pay deal bringing end to strikes in England – BBC News
[7] Labour considers PFI 2.0 to build schools and hospitals (thetimes.com)
[8] Rachel Reeves warned over ‘risks’ of private finance plan for schools and hospitals (inews.co.uk)
[9] FINAL – 17/07/24 King’s Speech 2024 background briefing final GOV.uk.docx (publishing.service.gov.uk), pages 52-53 / Rachel Reeves warned over ‘risks’ of private finance plan for schools and hospitals (inews.co.uk)
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