Construction Chiefs Wary of Trillion-Dollar Funding Challenge

Although few sectors stand to benefit more from Donald Trump’s presidency than construction, many of its leaders, including the head of the world’s largest building materials company, aren’t firing up the cement kilns just yet.

Their caution has implications for many other industries, ranging from hospitality to transport, that hope to benefit from an overhaul of the country’s aging infrastructure.

The president on Tuesday heralded a $1 trillion investment in new roads, bridges, tunnels, airports and railways. The expense, he said, would be covered via a combination of public and private funding, though it remains unclear how much new spending would need to be approved by Congress.

Investors are excited, pushing up the share prices of construction companies in America and across the globe. Shares in local players U.S. Concrete and Granite Construction have risen by 38% and 10%, respectively, since Trump’s election in November. Shares in the world’s largest buildings materials company, Zurich-based LafargeHolcim, have risen 10%.

“You see the commitment, you see the need,” LafargeHolcim CEO Eric Olsen told the Wall Street Journal. “Now we need to make sure that the funding is in place to be able to do it.”

Olsen had just handed down a net profit of 1.79 billion Swiss francs ($1.81 billion) in the year through December, swinging from a loss in 2015.

“Infrastructure is a real theme and the U.S. is certainly a part of that theme,” Olsen said. “I’m convinced good infrastructure investment pays off three times what you put into it, but you need to have the capital up front and debt levels are high in many governments.”

Republican budget hawks already have expressed concerns about some elements of Trump’s latest policy speech, which advocated for higher spending on defense and infrastructure, while also cutting taxes. Trump has suggested that increased economic activity stimulated by tax cuts and investment would help offset any reduction in government tax receipts.

At around $20 trillion and counting, the national deficit grew rapidly during the Obama administration and Trump risks running into the kind of debt-ceiling crisis that plagued his predecessor’s rein. The latest suspension of the national borrowing limit expires on March 15.

One solution could be to offer developers tax credits, giving them more incentive to invest, without placing as heavy a burden on the budget as direct project financing.

“Although rhetoric from the Trump administration remains extremely constructive, it remains too soon to estimate the timing or magnitude of incremental investment,” Granite Construction CEO Jim Roberts recently told investors on a conference call. “Promises to rebuild America’s infrastructure are great, but we remain cautiously aware of how slowly Congress acts,” he said.