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Trump and Brexit should not give you the hump

The twin shocks of 2016 – Brexit and Trump – have left a cloud of depression in their wake.

But now the shock has sunk in, both events potentially offer up rich opportunities for the UK construction sector.

Take Trump first.

When it comes to the impact on the UK, we have much to be optimistic about. His plan to leverage $1tn in infrastructure investment through public-private partnerships and private investments over the next decade is a very exciting prospect.

Furthermore, uncertainty caused by an unpredictable Trump can work to the UK’s advantage. It will create a short-term opportunity window of about 6-12 months in which international investors – reluctant to invest in the US – could turn to the UK.

They see these shores as a safe haven for investment, particularly in property and construction.

Investment funds within the US will not want to sit back and wait up to 12 months for the instability and uncertainty to subside. They are not going to go to Europe because Brexit causes them concerns: Britain was seen as a stabilising power in the EU.

Encouraging signs

Giant US bank Wells Fargo announced this summer it was buying up 33 Central in the heart of London’s financial district for £300m to make its European HQ there, while insurance company China Life and China Investment Corporation are among the latest financial firms from the Chinese mainland set to open offices in London.

“UK companies can take advantage of a whole new sector that will open up for them”

Other recent encouraging signs include the $1bn US engineering consulting giant Louis Berger targeting some of the UK’s largest infrastructure projects.

Secondly, Trump’s announcement regarding major infrastructure investment is centred on a public-private partnerships approach, based on the historic UK private finance initiative (PFI) model.

The US is still finding its feet with this methodology having delivered some roads, a little rail and a tunnel, but these are isolated examples in rural Florida and California, not major cities like New York.

This presents a massive opportunity for UK companies with this expertise. They can take advantage of a whole new sector that will open up for them. First the US needs to create a functioning PPP market, and firms like ours in the UK are among the people who can help them do it.

The majority of the social and economic infrastructure projects and the engineering infrastructure projects such as road and rail will be delivered by the large domestic organisations like Aecom, which offers architecture and engineering design services.

Those US-based companies will transfer UK PPP expertise across the Atlantic to get a headstart on the market.

Brexit blues cast aside

The vote to leave the EU has been a perfect excuse for those who had paid too much for land, hadn’t properly considered house prices in their development appraisals, or considered that residential prices would continue to climb.

Most of those projects that people shouted about stopping, while blaming uncertainty over Brexit, were not really viable in the first place. Perhaps they didn’t have planning permission or had other planning issues, they fundamentally couldn’t be funded because the development appraisals or the residual values didn’t work out.

Brexit came along at just the right time for many to conveniently say uncertainty over its outcome was a reason for them to stop, when in fact their project just didn’t stack up properly before Brexit. A slowdown in the high-end market had started anyway – 12-18 months ago.

“Many of the doom-mongers complaining about Trump or Brexit have been swept along by a populist narrative”

Philip Hammond’s Autumn Statement provided some good news with the government’s commitment to spend on social and economic infrastructure.

Whether the government decides to make that infrastructure investment through PFI or more traditional delivery methods, there could be lot of money coming into the UK from overseas, encouraged by the current weakness of sterling.

There is certainly a need for large-scale infrastructure investment in prisons, police stations and custodial units, schools and universities, hospitals and specialist healthcare units.

Many of the doom-mongers complaining about Trump or Brexit have been swept along by a populist narrative. To a certain extent it also reflects their own inability to adapt – and if you can’t do that then you die.

Seizing the golden opportunities that have opened up is a much more sensible way forward.

Michael Thirklettle is CEO of McBains Cooper

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