The construction industry reacts to the Spring Budget
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Now that the construction industry has had time to digest the impact of Chancellor Jeremy Hunt’s Spring Budget, we gauge the early reaction of some of the leading figures within the sector.
Simon Rowland, UK partner in the construction team at Womble Bond Dickinson:
“Whilst the last 18 months have seen extreme volatility in materials pricing and shortages which has caused pain for contractors and clients alike, the loss to the sector of qualified and unqualified labour has been a constant drain on the industry for a number of years. We welcome the Government’s willingness to accept the Migration Advisory Committee’s interim recommendations to add five key construction occupations to the Shortage Occupation List, which we hope will ease immediate pressures on an already strained sector. Obviously further work needs to be done in this area – but that is longer term requiring investment in apprentices, schools, and retraining bodies to make the construction industry a more attractive and diverse place to work.”
David Hopkins, chief executive of Timber Development UK:
“The budget announcement was largely unambitious and does little to support the net-zero transition in construction.
“Full expensing on capital investments is welcome as the industry attempts to shift to new, greener methods of construction, but it still represents a fall on the previous offer under the now-ending super deduction.
“This alone may not provide the stability necessary to keep the sector building, especially since funding support for housebuilding and green energy infrastructure seemed distinctly lacking in the chancellor’s statement. Announcements around HS2 last week will also make many investors nervous about the future pipeline of work in the UK, and little was said today to assuage these fears.
“Meanwhile, the innovation investment zones announced by the Chancellor, along with localised levelling up initiatives, were interesting but will be small comfort to many small and medium construction businesses struggling in a stagnating economy, with high material and energy costs.
“Measures to help more people into the workforce and recent announcements on visas for foreign construction workers are good to see. However, they also serve to highlight the productivity challenges the economy faces. We are also disappointed in the lack of announcements around upskilling, which could support a green growth economy in this budget.
Overall, whilst the UK may have narrowly avoided a recession, this budget will do little to change the construction environment. Finally, we might highlight the £20bn investment in early-stage carbon capture and storage technologies and ask whether the government has missed an opportunity to invest in an already existing technology in the form of “trees”. Perhaps revisiting failed tree planting targets could be considered next time.”
Tom Hall, chief economist Barbour ABI:
“The 12 low-tax investment zones announced in the budget could provide a boost for the construction industry in areas which have not rebounded as strongly post-Covid.
“In particular, our research suggests that contract values in the East Midlands have fallen 6% in 2021 and 2022 compared to figures before 2020, even with rising construction costs.
“Meanwhile, other listed areas such as Manchester, Liverpool, West Midlands, Yorkshire and Scotland are currently some of the weaker areas in terms of contract awards value growth, though the Northeast is an outlier, having already experienced 70% growth in the past two years.
“Subcontractors and suppliers would do well to explore these regions in the coming years to take advantage of any opportunities. However, there is a real danger that this will just be a case of moving money around and leaving other areas underinvested in. It’s also unlikely to make any difference to the significant imbalance between London and other regions.”
Brendan Sharkey, head of Construction and Real Estate at MHA:
“Unfortunately, the four ‘E’s’ do not deal with one of the key issues facing the economy, namely the lack of housing, particularly affordable housing.
“Housing is basic human necessity and wherever you look there is a shortage. The growing number of homeless people, the frenzy when accommodation is made available for renting and the increasing cost of renting all bear this out.
“For housing, there is a big disconnect between the what the sector needs and government policy.
“All the major house builders are publicly saying they will build fewer houses this year than last year. What we needed from the Chancellor today was a stimulus for the housing market. Unless our housing stock increases significantly, the problem will only get worse. Stamp duty reductions and tax relief on mortgage interest for first time buyers would have really helped but the budget did not address these issues at all.
“In addition the government wants to see an improvement in the quality of housing stock. However, it is not doing anything to help with supply and the enforcement of Minimum Energy Efficiency Standards (MEES) could mean that some housing becomes unlettable. The lack of incentives for retrofitting such as VAT exemptions and grants and financial support such as soft loans is hard to understand.
“Construction, like many sectors, is struggling to find the staff it needs so hopefully the proposals to increase employment and help the economically inactive back to work will bear fruit.”
Kate Kenny, Jacobs People & Places Solutions Senior Vice President Europe:
“With the triple challenge of energy security, affordability and decarbonisation front of mind for many households and businesses in the UK, it was encouraging to see the Government commit to future energy needs through the launch of Great British Nuclear, classifying nuclear power as environmentally sustainable in our green taxonomy subject to consultation, and accelerating energy infrastructure innovation through £20bn of investment into CCUS.
“As important is the pledge to deliver 12 new investment zones and support local regeneration investment and sustainable transport infrastructure. Ultimately, these long-term investments require agile, integrated and digitally enabled approaches, which will help unlock total value and deliver better outcomes that balance all our societal, environmental and economic needs.”
Jon Prichard, Chief Executive of MPA:
“The Chancellor’s announcement on funding for CCUS is welcome and important for the UK’s cement and lime producers. But following on from last week’s announcement of infrastructure delays, this Budget was a missed opportunity and does little to tackle Britain’s longstanding challenges on delivery of transport projects and housing.
“MPA’s key ask in our Budget submission was to focus on making the UK a competitive proposition for investment. Full expensing of investment partially softens the blow of increasing Corporation Tax and removing the super deduction, but it is still overall a move in the wrong direction.”
Martin Wassell, Managing Director, BIP UK:
“The government’s energy price guarantee was welcomed news for many families at a time when budgets are being squeezed at every possible angle, and it’s encouraging to see an extension of this measure at a time where these pressures are continuing to pile up.
“Although this extension is positive in the short-term, it is simply not enough to tackle the rapidly rising price of energy. Although the Chancellor emphasised the UK’s position as a world leader in offshore wind, we still aren’t leveraging enough sustainable energy sources, which requires institutional change as well as a cultural shift towards more conscious consumption.
“The main way to combat the energy crisis is through clean energy solutions, and we welcome the government’s decision to allocate up to £20bn of support for the early development of carbon, capture, usage, and storage. Our hope is that investment is directed towards heavy emitting sectors, such as steel, and doesn’t become an excuse to de-prioritise emissions reductions. CCS technologies are still an early-stage concept, but could go some way to drive energy bills down in the long run, and boost the country’s energy strategy.”
Dr David Crosthwaite, Head of Consultancy at the Building Cost Information Service (BCIS):
“The announcement that five construction occupations will be placed on the Shortage Occupation List is a beacon of hope in an otherwise underwhelming Spring Budget, that lacks a clear industrial strategy to encourage construction investment and stimulate economic growth.
“The announcement of measures to boost the number of Ukrainians entering the labour market and returnerships, targeted at the over 50s – will do little to replenish construction’s dwindling workforce. We need a more concerted approach that prioritises investment in apprenticeships and training, to tackle ingrained labour shortages.
“BCIS welcomes the continued commitment to capital investment programmes. But the fact that many of these have been postponed – such as parts of HS2 and Lower Thames Crossing – will inevitably push up the price of these projects in the long term, due to their budgets being eroded by inflation.
“The government’s commitment to public sector investment is encouraging and we look forward to the publication of the National Infrastructure and Construction Pipeline later this year, to see how much of the £600bn is invested in construction.”
Elizabeth Hardwick-Smith, group people and culture director at Pick Everard:
“Operating within a sector that struggles to attract and retain as many women as men, we welcome the announcement of extended childcare support for one-to-two-year-olds. Being unable to access or afford childcare is seen as significant barrier to work, especially for women. These changes will affect early years children and are intended to unlock work for those who have either felt pressured to reduce their hours or give up work completely to care for their young families.
“The proposals shed further light on how this is an issue that disproportionately affects women. The Institute for Fiscal Studies research has already showed how female employment rates fall from 90% to 75%, with average weekly hours also falling from around 40 to less than 30 when women become mothers.
“As a business committed to building an inclusive and diverse workforce, we fully recognise our own role in accelerating the drive for change and gender parity. We’ve made headway on developing a more inclusive candidate experience and we’ve reviewed our policies, development opportunities and people practices ensuring they are more accessible and attractive to female talent.
“Our aim is to develop new pathways and gateways for women into the construction industry, engaging more early careers talent while supporting the progress of high potential women into leadership positions. We remain supportive to embracing new ways of working such as agile working practices and providing a culture where people can bring their best selves to work. Today’s proposals will help reshape our focus as we continue to drive inclusion and diversity in our business, which enable more women to achieve their full potential in the construction industry.”
Paul Fakley, Engagement Director at British Safety Council:
“Well over a million people in the UK say they would like to work but are currently ‘economically inactive’, which is why actions taken to reduce barriers which prevent many people staying in or returning to work are welcome. This includes better support and incentives for disabled people, those with long-term health conditions, the over 50s and parents of young children.
“We know the biggest cause of ill-health or absence from work is stress or poor mental health, followed by muscular-skeletal disorders, so the extra money and support announced here is positive, as is funding to help prevent suicide. There was also some extra funding announced for SMEs to provide occupational health support.
“The cost of living will continue to have a big impact on people’s wellbeing, despite the projected fall in inflation this year. Some employers can’t match this with pay increases, but there is much they can still do to support their staff, through financial awareness, flexible working and other incentives like vouchers and rewards.
“We know that good work is good for our mental and physical health, and employers have a vital role in improving the wellbeing of their staff both in and outside of work, which is why we are calling on the Government to go further and develop a National Wellbeing Strategy.”
Simon Rubinsohn, RICS Chief Economist:
RICS is disappointed by the lack of housing ambition in this budget. The fallout from the ‘mini-budget’ hit the housing market hard, and we still have the challenges of limited housing stock and rising rents as reported again in last week’s RICS UK Residential Market Survey (UK Residential Market Survey (rics.org) )
Investment and support in creating housing stock both in the right place and of the right tenure, to support both buyers and renters is critical now more than ever. This could be through new builds and suitable, standards-driven conversions, given the removal of housebuilding targets. With political will, there is a way.
“There is also merit in revisiting the stamp duty system, which is detrimental to [sales] activity, including a stamp duty break for downsizers to encourage them and enable them where stamp duty is a barrier to their plans to downsize, to free up family-sized homes.”
Russell Dean, Mitsubishi Electric Residential Product Group Director
“While today’s Budget will continue to build the foundation for achieving Net Zero, it could have gone further and build upon a commitment for the environment and to reach the target by 2050.
“Several measures announced in today’s Budget, including the extension of the CCA (Climate Change Agreement) Scheme and plans to invest in more domestic sources of energy, will support the transition towards more renewable and secure energy sources by 2050. The extension of the Energy Price Guarantee also provides much-needed help for families struggling with the ongoing cost-of-living crisis.
“However more long-term viable solutions for reaching Net Zero would have been welcomed in today’s statement.
“One measure that could lower energy prices further would be to decouple electricity from gas. While the price of electricity is pegged to the cost of gas, dependent upon its demand and supply, or potential for weaponisation as with the war in Ukraine, it will remain at risk of continued price hikes.
“As many businesses plan to remove gas from their buildings over the next few years, and heat pumps are recognised as the future of both commercial and home heating in Britain, it is also vital the government supports wider adoption of the technology. To encourage this, we would have liked to have seen a commitment to roll over unspent money from the Boiler Upgrade Scheme for families to insulate their homes and install the technology.
“As part of this, the government must also incentivise the training of more installers to fit heat pumps. Without this, the current target of installing 600,000 heat pumps per year by 2028 is in jeopardy.
“While today’s statement indicated promising signs of a transition towards renewable alternatives, encouraging greater investment in heat pumps, alongside more installer training, will help driver wider adoption of the technology as we look towards net zero.”
Cllr James Jamieson, Chairman of the Local Government Association:
“It is good that the Chancellor has acted on council calls for funding and measures to widen employment support, improve local roads, protect swimming pools from rising costs and funding for vital regeneration efforts. Lower borrowing rates for councils will also provide a boost for vital council housebuilding projects.
“A third round of levelling up funding will give councils the opportunity to forge ahead with ambitious plans to transform their communities and unlock potential for more local growth. However, we remain clear that levelling up should be locally led by evidence of where crucial investment needs to go to, not based on costly competitive bids between areas.
“Given this is a ‘back-to-work’ Budget, it is disappointing there is no further investment in adult social care, public health and children’s services, which all play a vital role in supporting economic growth and helping people back into work, alongside boosting people’s health and wellbeing.
“We are pleased the Government has acted on our calls for investment in early years education and childcare. Councils have a duty to ensure sufficiency of local provision and so will need to be given a key role in making sure they succeed. Delivering on today’s announcements will also require significant investment into the workforce and early years’ facilities.
“Every local economy is different, and people can find themselves ‘economically inactive’ for different reasons. With control over fragmented and disjointed national employment and skills funding and schemes, councils could build on their track record of helping get people back into the workplace – including those who are furthest from the jobs market – and plugging growing skills gaps.
“We want to work with government on a long-term funding plan which ensures councils have adequate resources to deliver local services for our communities. Alongside sustainable long-term investment in local services, bringing power and resources closer to people is also key to improving lives and building inclusive growth across the country, and many more places are ambitious to follow in the footsteps of the devolution trailblazers which are a positive step towards more local decision making.”
Stephen Beechey, Group Public Sector Director, Wates Group:
“We welcome the Chancellor’s Spring Budget today. As a long-term partner of Government, we are pleased to see the continued commitment to delivering high-quality infrastructure and the promise of an updated National Infrastructure and Construction Pipeline. This is a welcome step in the right direction – but the Government must give urgent consideration to putting in place a pipeline that looks three to five years ahead. Taking this step would give industry the certainty it needs to make long-term decisions in important areas including investment, hiring and training – all of which will drive economic growth.
“We further welcome the Chancellor’s new Levelling Up partnerships. Giving people pride of place in their area is vital to meeting the Levelling Up Agenda – we are already doing work in this important space and look forward to continuing to support the Government’s vision.
“Delivering Net Zero must remain a central part of the agenda and we would encourage the Government to be more ambitious when it comes to driving forward the decarbonisation of Government, commercial and residential buildings across the UK.”
Graham Harle, CEO Gleeds:
“This budget was set against the backdrop of global uncertainty as well as a desire by the Chancellor to pacify the disgruntled Tory right wing. It is a bit like trying to carry a delicate Ming vase coated in olive oil across an ice rink wearing stilettos. One false move and it’s all going to end up in a hundred pieces.
We wanted three things – help to alleviate critical labour shortages, guarantees on infrastructure spending, and tax incentives to impact carbon reduction refurbishment of residential and commercial buildings. What we got was promises of more enterprise zones, investment incentives for mini nuclear power projects and tax breaks for capital expenditure investment. These are all welcomed and admirable but long-term aspirations are not short-term fixes.
Our sector employs up to 7% of the working population, we needed clear strategic vision from Government to promote investment and grow confidence. In spite of the claim that this was a budget for growth, it was in fact a careful economic statement from a pressed Chancellor who had more headroom to invest, due to £30bn less borrowing costs, than he used. I am disappointed that there were no defined measures to assist us operating in the built environment, one of the largest and most impactful sectors in the UK.”
Chair Rick Green, Asphalt Industry Alliance (AIA):
“The additional £200m one-off payment for local roads in England is welcome, but it’s a fraction of the amount local authorities have reported over decades that they need to keep their networks to target conditions, let alone tackle the backlog of carriageway repairs.
“The Chancellor is right to recognise that potholes on our local roads are a curse, but the key thing is they are not inevitable, they are the symptom off a network underfunded for many years. Unlike other transport networks, there is no visible long-term investment plan for local roads and without one, road users won’t see any real improvement in structural conditions on the roads they use every day and on which all other locally provided services rely.
“It will be interesting to see how the findings from our 2023 Annual Local Authority Road Maintenance (ALARM) survey Report, to be published next week, build on the previously reported trends between underfunding and the declining conditions of our local roads.”
Nigel Purves, Co-founder and CEO of Wayhome:
“The nation’s first-time buyers are currently tackling the highest cost of homeownership on record and it’s bitterly disappointing to see the government turn their back on them yet again. Having afforded them some brief stamp duty respite during the pandemic, they clearly feel their job is done and have now left them out in the cold to fend for themselves.
“While we certainly weren’t expecting another stamp duty reprieve, nor do we believe these intermittent discounted buying costs are the answer, a commitment to at least building more homes would have been a start.
“We were also hoping to see amendments to stamp duty laws to bring parity for all homebuying schemes. This would allow those who utilise additional methods, such as Gradual Homeownership, to be afforded the first-time buyer rate of stamp duty tax when they do come to purchase their home, rather than the rate applied to an existing homebuyer.”
James Forrester, Managing Director of Stripe Property Group:
“While we certainly need a better balance of investment across the nation, the Levelling Up Fund has so far been lopsided, to say the least.
As it stands, the North West has seen a substantial amount of investment, while the North East has been largely ignored. So today’s news that the region will benefit from the next round of investment is, of course, positive for the regional economy, along with the economies of the other areas earmarked to benefit.
However, we can be forgiven for holding our breath until we know for sure just how the latest £80bn has been allocated and which areas of the nation stand to see the largest boost.”
Iain Crawford, CEO of Alliance Fund:
“It’s disappointing not to see any new ambitions with regard to housing delivery in today’s budget. There’s been a severe lack of new homes reaching the market in recent years and so you would have hoped the issue of housing supply would have been higher on the agenda.
“Instead, it seems as though the government has chosen to throw in the towel with no new targets set and this certainly isn’t going to help solve the housing crisis.”
Kimberley Gates, Head of Corporate Partnerships at Sirius Property Finance:
“Rather than address the housing crisis head on, the government has chosen to shy away from the issue, relinquishing any accountability by failing to set new housebuilding targets.
This hands off approach is sure to see the already inadequate level of new homes reaching the market decline even further. For homebuyers, this means less choice, higher prices and an even tougher task when attempting to climb the property ladder.”
Marc Vlessing, CEO Pocket Living:
“While we broadly welcome the support measures announced by the Chancellor to help stimulate economic growth and further mitigate the impact of the cost-of-living crisis, one area where the government does need to go much further on is the support for those aged 25-45 years old who feel increasingly locked out of the housing market. With the effective end of Help to Buy at the end of this month, we need a new, bold, package of measures to both increase the supply of new affordable housing and support first time-buyers onto the property ladder. At Pocket Living we have been working on a series of innovative measures which could see the delivery of 1.6m extra new homes delivered on small brownfield sites across the country, which will not only expand housing opportunity, but crucially increase productivity especially in high-value housing areas were vast swathes of workers are effectively priced out. Small sites should form the foundations of any flourishing housing sector and through simple changes to policy, the government can not only support greater housing delivery, but also deliver on its levelling up agenda, at no extra cost to the treasury.”
Lysan Drabon, Managing Director Europe, Project Management Institute:
“Talking about breaking down barriers to employment is not enough. We need to see positive action that will make a real difference to getting people back in to work and supporting the UK’s economic growth. We need to equip the workforce with the new skills that the economy needs.
“Although the world of work has changed significantly in the last few years, the way we train our workforce hasn’t. What our research tells us is that skills such as conflict resolution, leadership, communication, and problem solving are the skills that are missing. 7 in 10 businesses that prioritise these ‘power skills’ alongside technical skills in their workforce experienced consistent project success in the past year, according to our Pulse of the Profession 2023 study.”
Olivia Harris, CEX, Dolphin Living:
“The Chancellor is absolutely right to focus on increasing productivity as a means of boosting economic growth, and we welcome the support around more affordable childcare as part of that. However, this focus must also include tackling one of the critical areas holding back productivity in areas such as London and other expensive parts of the UK. Namely the high cost of housing and how that is having a significant detrimental impact upon the ability to attract and retain key sector workers across both public and private sectors. This is especially the case in London where those workers who literally keep the city running are being priced out and can no longer afford to rent here. This is having a huge economic as well as social impact. As a response the government needs to commit to a productivity partnership with housing providers to deliver at scale discount to market rented housing to address this critical need.”
Jatin Ondhia, CEO of Shojin:
“Prudence and stability were clearly right at the heart of Hunt’s Spring Budget. Undoubtedly, the hangover effect of his predecessor’s gargantuan economic gamble – and the corrective fiscal squeeze that followed – left little room for any wild cards.
“From the perspective of where the government and economy found itself in late 2022, a relatively quiet Budget is not a bad thing. It shows they are being financially responsible. However, at a time when sky-high inflation is compounding the housing crisis, is no news really good news? Building costs are through the roof and access to finance remains a big issue for developers, in turn damaging efforts to boost the UK’s housing stock.
“Quite ridiculously, the revolving door for housing ministers has left the UK with six different MPs holding the role in the space of a year, while the scrapping of mandatory housebuilding targets, means that what we needed today was some clear policies to get Britain building. While all eyes will remain on Hunt and Sunak’s conservative fiscal policies, the lack of decisive action on planning reforms, construction output and the lack of affordable homes could be a dangerous oversight. Evidently, the private sector will have to forge ahead to ensure property development continues at pace.”
Paresh Raja, CEO of Market Financial Solutions:
“It’s no secret that there are issues requiring attention in the property sector, most notably where housebuilding activity, planning regulations and the national housing stock are concerned. Clearly, as Hunt looked down his list of priorities for this particular Budget, these items were overlooked in favour of other pressing concerns.
“In truth, the property market could benefit from the Chancellor’s prudent economic approach. While there may not have been any noteworthy policies or investments relating specifically to property, his efforts to combat the cost-of-living crisis and bring much-needed stability to the economy should be welcomed.
“We saw how tumultuous the effects of the mini-Budget were back in September. The ill-fated announcement fuelled significant interest rate changes and a great deal of uncertainty. Hunt has favoured a cautious approach, and the property market will likely benefit from a sense of economic calm, particularly if inflation continues to fall and interest rate hikes come to an end.”
Mark Robinson, group chief executive at SCAPE:
“Limitations to public sector spending from the Chancellor were to be expected, with local authorities being told to strengthen their existing budgets and, in some cases, manage real-term cuts.
“Public sector investment in infrastructure has been a major driver of growth and community change post-Covid, and the concern is that any long-term reduction in local spending has the potential to limit the positive effects of ongoing regeneration plans.
“To this end, the further devolution of powers to the combined authorities in Greater Manchester and the West Midlands is a significant takeaway for the construction industry. Having greater say over local transport, skills and housing will ultimately lead to more focused spending, which can only benefit investment in local communities – be that infrastructure-led or otherwise. We hope this sets a precedent to be swiftly followed in future Budgets.”
Donal O’Riain, Founder and Director of Ecocem:
“All investment in reducing global carbon emissions is welcome, but today’s announcement by the UK Government that it will invest £20bn in carbon capture technology is another example of how focussing exclusively on carbon capture is at the expense of broader, less costly, and more readily available innovation.
“Within the cement industry, which represents 7% of all global carbon emissions, the market is ripe with innovation. While Carbon Capture technology will have a role to play to decarbonise cement when it is ready, new technologies already exist that can halve emissions from cement by 2030, at very little extra cost compared to traditional cement products. It is currently predicted that Carbon Capture technology won’t be operational until at least 2035 and then only at huge expense and requiring massive infrastructure changes.
“By focusing investment solely on Carbon Capture technology, the Government is slowing down critical industry innovation. It would do well to think shorter term and move to reduce emissions now – not in ten years when CCS may finally be deployable.”
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