Labour’s victory: the future of construction, infrastructure and energy under their manifesto

Introduction

In the period leading up to the 2024 general election, the prospect of political change was highly anticipated in the UK. This came to fruition as the results confirmed a new political era with Labour coming to power. Building on our previous article What Happens Next for the UK Construction Industry if Labour Prevails?, we consider some of the manifesto pledges made by Labour and the potential impact these might have on the construction, infrastructure and energy sectors in the UK.  

Labour win – “…The sunlight of hope, pale at first but getting stronger through the day…”?

Labour achieved a landslide victory at the 2024 general election: a stark contrast to the position in 2019. Sir Keir Starmer will become the new UK Prime Minister and leader of “a changed Labour Party”, announcing “…Change begins now”.  During his victory speech, Starmer talked optimistically about the opportunity for the future of the country but recognised however that his mandate “comes with a great responsibility”.

More widely, there were also gains for the Liberal Democrats, Reform UK and some independent candidates. It is clear from the results that politics is not always predictable, and many news commentators have reported the vote as a ‘backlash’ against the outgoing Conservative Government. The Conservatives appeared to concede defeat in the early hours of 5 July 2024, as a number of top Conservatives, including Cabinet Ministers, had lost their positions as seats changed hands with the vote. Given the fragility of some of the seats, time will tell what the immediate construction response is and how Labour will execute their plans for the UK.

What have Labour pledged?

In the run up to the election, Labour stood on six pledges. The fourth – to set up a publicly owned clean power company (Great British Energy) – is in line with their objective to make Britain a clean energy superpower and energy self-sufficient. Labour is aiming for a zero-carbon electricity system by 2030. Current 2023 statistics indicate that an annual record (47.3%) of power generation came from renewable sources, with a quarterly record of 51.5%, which is the first time over half of all UK power generation came from renewable sources[1].

Nuclear power is being positioned as instrumental in decarbonising British electricity. However, with output in 2023 down 62% from its record high in 1998, when output peaked[2], changes to the current approach will be required to guarantee electric decarbonisation. Labour purports to fully back the nuclear sector with manifesto promises to get Hinkley Point C completed, extend the life of existing plants, and to create new nuclear power stations such as Sizewell C and increase the rollout other Small Modular Reactors.

It is inevitable that there will be construction and consultancy opportunities on such complex projects, as well as job creation and associated economic impacts. State owned Great British Nuclear will also likely play an important role in delivering Labour’s plans, especially since it is purchasing the Wylfa and Oldbury sites from Hitachi in a £160m deal[3]. Further, the National Policy Statement for New Nuclear Power Generation (which is undergoing parliamentary process) may be impacted by Labour if they win, particularly when considering Labour’s plans for the North Sea.

In the push towards decarbonisation, Labour proposes a move away from offshore oil and gas in the North Sea. With the commitment not to issue new exploration licences and the closure of so-called ‘loopholes’ in the windfall tax, such steps may directly affect the oil and gas industry. In addition, Labour will extend the sunset clause in the Energy and Profits Levy (which currently means the windfall tax will be removed on 31 December 2025) until the end of the next parliament and increase the levy by three percentage points. Labour also plans to ban fracking and will not issue any new coal licences. Such steps are likely to mean that renewable energy opportunities will become more attractive and play a major part over the rest of the decade.

Labour’s manifesto pledges for renewables (other than nuclear) include doubling onshore wind, tripling solar power and quadrupling offshore wind by 2030. Investments will also be made into carbon capture and storage, hydrogen and marine energy. This will be done via a new Energy Independence Act which will aim to establish the framework for Labour’s energy and climate policies, as well as through Great British Energy.

In terms of funding, Labour plan to capitalise Great British Energy with £8.3bn over the course of the next parliament. According to their manifesto, this money will be raised by the windfall tax on oil and gas companies and borrowing to invest within fiscal rules.

Labour’s ideas for the future also reportedly include:

• Merging the Infrastructure and Projects Authority (IPA) and National Infrastructure Commission (NIC) into a new body called the National Infrastructure and Service Transformation Authority, with new powers aimed at speeding up and supporting the delivery of major UK infrastructure projects and driving growth;
• Improving rail connectivity across cities to the north of England and bringing the railways into public ownership once contracts end. There have, however, been criticisms over Labour’s approach to HS2 over the years and in the run up to this election;
• Attention and investment on fixing potholes in roads and other electric vehicle infrastructure;
• Investment in carbon capture, clean steel plants, green hydrogen and gigafactories;
• Changes to the planning system as well as planning officer recruitment;
• Updating the National Policy Planning Framework to include mandatory housing targets for local authorities; reform of the compulsory purchase order compensation and fund; and the delivery of over 1.5miln new homes (including social and affordable housing) in England over a five-year period;
• A Warm Homes Plan aimed at helping install energy efficiency upgrades to future-proof homes and cutting bills;
• Changes to immigration, and the apprenticeship schemes and levy, to tackle skills shortages; and
• Launching an industrial strategy and prioritising sectors where the UK has strengths or advantages over other countries – e.g. advanced manufacturing.

Commentary

The general election and prospect of a new UK Government inevitably led to a degree of uncertainty within the UK.  Certain industry associations and bodies (such as RICS and the ACE), as well as Tier 1 contractors and consultants, responded to this by promoting their respective positions or ideas for future growth and stability in the run up to polling day. This included seeking greater certainty from the incoming Government on investment and commitment in larger infrastructure projects and planning. The UK construction industry has previously criticised the administrative processes, increased costs, and delays on new projects due to what are perceived to be outdated and restrictive planning laws. This is also against a backdrop of rising costs associated with labour, goods, materials and interest rates in the market, and a proportion of organisations in the supply chain already experiencing financial difficulties or facing insolvency risk.

The announcement of the general election in May 2024 also came at a time when various bills relevant to the construction industry were still making their way through Parliament. Beale & Co previously reported on some of the bills which became legislation as part of the ‘wash up’ process before Parliament closed, and those which fell pending the outcome of the election.

We considered in earlier commentary how the Labour Party’s policies might impact the future procurement and payment of construction contracts, and professional appointments. We also covered other Labour policies and initiatives previously announced in the context of planning, health and safety, and the environment, noting that these may directly affect contract terms and the risk allocation between key regulators/stakeholders, employers, and project teams.

All the main parties’ manifestos presented a range of different live and future opportunities within the construction, infrastructure, and energy sectors. The residential and transport initiatives, and the focus on renewable energy projects, pose commercial and competitive opportunities for the wider construction sector, as well as new contractual, legal and regulatory risks which will need to be properly understood and navigated. Further, the main parties’ approaches to environmental and net zero policies, reflected that attention on climate change and environmental activism remain prominent in the UK. It is clear from recent case law, and other developments making the press, that the parties and businesses operating in the UK/EU cannot ignore the environmental impact of projects or products, or the necessary corporate disclosures and reporting requirements.

Other features relevant to the construction industry include the ageing workforce and scarcity of skills. There had been anecdotal reports across different sectors that construction organisations were experiencing difficulties in part of their recruitment, as well as diversity issues (both in terms of age and female representation) and a decline in interest in earlier education and training. Any changes introduced by Labour to address these issues, and their associated impacts on the economy, will no doubt be kept under continued review by UK businesses.

Next steps?

Having considered the key aspects and pledges in the Labour’s manifesto across two updates, we plan to reassess the evolving situation 100 days from now to see how the various promises have taken shape. Time will tell.

If you’re interested in finding out more about key trends impacting the UK and international construction, engineering and environment sectors, please contact the authors of this article or visit our website.

[1] Energy Trends March 2024 (publishing.service.gov.uk)

[2] Energy Trends March 2024 (publishing.service.gov.uk)

[3] Great British Nuclear buys Wylfa and Oldbury sites (nuclearinst.com)