HT - ECONOMIC & POLITICAL FACTORS Flashcards
What impact will the labour governments election have on the Property &
Construction Industries?
Election of the Labour government may have the following impacts:-
House Building Targets - Labour has pledged to build 1.5 million homes over the next
parliamentary term, reinstating mandatory housing targets and updating the National
Planning Policy Framework (NPPF).
Infrastructure Projects - Significant funding is planned for public infrastructure,
including transportation networks, renewable energy projects, and urban
development. This will create opportunities for large scale construction projects, likely
driving economic growth and job creation.
Sustainability Focus - Labour has committed to embedding green practices across
the industry, with policies focusing on eco-friendly materials, retrofitting existing
buildings for energy efficiency, and integrating biodiversity in urban planning. This
could lead to increased demand for sustainable construction practices through
regulations such as MEES.
Skills Development - Labour plans to address the construction sector’s skill
shortages through youth training initiatives and improved working conditions, such as
banning zero-hour contracts. This could create a more skilled and stable workforce
but will require significant investment to meet labour demands.
What impact will the 2024 US Election results have on the Property & Construction
Industries?
Currency fluctuations - The value of the US dollar often fluctuates sharply during and
after an election. These shifts directly affect the exchange rate between the dollar
and the pound, which in turn impacts the attractiveness of UK property to overseas
investors. A weaker pound against the dollar could mean heightened interest from
the US and other international buyers, particularly in prime markets like London
driving higher property prices.
Impact on Interest Rates - The US election influences the Federal Reserve’s
economic policies, which in turn affect global financial markets. Changes in US
monetary policy could lead to adjustments by the Bank of England. For UK property,
interest rates are crucial as a rise could dampen demand by making mortgages more
expensive. Conversely, if rates stay low, the market could remain buoyant, with
borrowing costs staying affordable for longer.
Supply Chains and Construction - Changes in US trade policy or tariffs could ripple
through the global economy affecting the cost of materials like steel and timber.
Higher costs for builders could slow the pace of new developments or push prices
higher for buyers in England.
Tech Development & Remote Working - If the election results encourage further
growth in the tech sector & remote working, it could bolster demand for homes in
England’s regional cities, which have become increasingly popular with remote
workers seeking affordability and a better work-life balance.
What is your Economic Outlook for the 2025 UK Property Market?
The UK property market in 2024 has been dampened by high interest rates which aim to
combat rising inflation. The Bank of England looks set to maintain relatively high interest
rates in comparison to previous low levels which is still impacting buyer affordability. This
increased cost of borrowing has also resulted in large scale developments being postponed
due to interest rate rises affecting their viability. For 2025 I am cautiously optimistic that
further interest rate cuts may be achievable due to falling inflation, this in turn should result in
increased market confidence with a backlog of postponed developments and transactions
taking place.
What is your Economic Outlook for the 2025 UK Construction sector?
The UK construction industry experienced a slowdown in 2024 due to rising material and
labour costs with high inflation and interest rates keeping prices high. Due to falling inflation
and small interest rate cuts towards the back end of 2024, material prices such as steel,
chipboard and plastic piping are now softening. These market shifts should result in material
price reductions entering into 2025 and create increased affordability for developments that
may have been postponed due to them previously being unviable. A further key challenge
remains a persistent skills shortage which is exacerbated by Brexit’s impact on labour supply
and a high rate of workforce retirement. This shortage is pushing up costs, making it vital for
the industry to invest in apprenticeships and training programs. Environmental sustainability
remains a key priority for the labour government which will support a continued shift and
preference for sustainable building methods and products. These are typically more
expensive which will see a trade off between affordability and sustainability for larger scale
developers.
What impact is hybrid working and working from home having on the property
sector?
Working from home is having a significant impact on both residential and commercial
property. Many workers now prioritise homes that can accommodate home offices, leading
to increased demand for properties with extra space or adaptable layouts. Properties in
suburban and rural areas are also in increasing demand due to the flexibility of remote work.
Due to these regions providing larger living spaces at lower costs, property values in these
areas have risen. Within commercial real estate, remote work is also reshaping office space
requirements with many companies now downsizing their office footprints as hybrid work
models become further entrenched. Long lease terms of 20-25 years on commercial
properties are declining in popularity with shorter term lease arrangements offering greater
flexibility now being preferred. In the future I believe there will be a continued shift towards
shorter term, flexible office arrangements with adaptable office designs that support hot
desking and open plan team collaboration areas. Due to increasing building regulations and
environmental targets, offices in prime locations with sustainable credentials will remain in
high demand.
Please explain your understanding of Project Bank Accounts?
A Project Bank Account (PBA) is a dedicated, ring-fenced bank account used in
construction projects to manage payments securely and transparently.
It is designed to ensure that all parties involved in a project including subcontractors,
suppliers, and the main contractor receive payments directly and promptly from the
account, minimising the risk of late or non-payment.
A PBA is set up at the start of a construction project, with agreements in place
between the employer, main contractor, and participating subcontractors on how
payments are made.
The employer deposits funds into the PBA for work completed with payments then
made simultaneously to all parties listed in the PBA agreement based on pre-agreed
terms which bypasses the traditional hierarchical payment flows from Client to Main
Contractor down to supply chain level.
What steps would you take in the event of a Main Contractor insolvency?
Ensure all contractual procedures related to insolvency are followed, especially
regarding termination rights and obligations.
Make records on payments made, work progress and materials on site.
If the contractor’s insolvency means they can no longer fulfill their obligations, the
contract should be terminated following the specified procedures.
The site should be secured to prevent further damage or unauthorised access if the
contract permits this. It may also be necessary to inform subcontractors to remove
materials or to secure their assets
A chartered surveyor should prepare a detailed valuation statement reflecting the
current state of the project. This includes assessing completed works, retention
sums, and any outstanding claims, such as loss and expense.
Engagement of alternative contractors may be required. If a new contractor is
appointed to complete the work, a new tender process or a novation of the original
contract may take place.
If the contract includes provision for step-in rights through collateral warranties a
lender or developer may take over the project.
