Major players in the construction sector have given their takes on the Spring Budget which was announced by Chancellor of the Exchequer Jeremy Hunt yesterday [15 March], addressing key points such as free childcare, housing and offsetting labour shortages but also examined what the Budget was lacking.
In a push to get people back to work, there will be an extension on free 30 hours a week childcare for parents with children aged nine months to three years, provided both parents are working.
Most notably, the government’s Energy Price Guarantee will continue until the end of June, keeping the energy price cap at £2,500 a year for an average household rather than it rising to £3,000 a year from April.
The government has also committed to invest £20 billion over the next two decades on low-carbon energy projects.
Immigration rules will be relaxed for roofers, bricklayers, carpenters and joiners, and plasterers in construction sector to ease labour shortages.
James Talman, CEO of the National Federation of Roofing Contractors (NFRC), said: “Firstly, it is positive that full capital expensing will be made available for the next three years on plant, machinery and IT equipment. This will be of assistance to firms for investment in much-needed improvements, and it is vital that steps are taken to ensure they have the cashflow to do so. We would have liked to see an equally significant commitment to relief on any asset that improves the energy efficiency of a building, such as a new roof—particularly as retrofitting our buildings is a crucial step in meeting the government’s net zero targets.
“It will also be a relief to firms that the Energy Bill Discount Scheme will continue for another year, until 31 March 2024. Many have concerns about cashflow and this will be helpful but not sufficient to resolve the pressures placed on firms by the impacts of a period of high inflation, with businesses paying more for labour and materials as well as energy, and blighted by continued late payment. The government should evaluate what more can be done to reassure businesses that they have the cash available to weather the storm and continue to do their vital work on our homes, schools, offices and factories.
“Whilst the Chancellor made numerous announcements on getting more people into work, it is not clear that this will resolve gaping skills gaps. Roofing firms report that they are still finding it too difficult to recruit the people they need. Funding for skills needs to be focused on meeting national skills needs, and for construction, the government should be ensuring everyone, regardless of where they live in the UK, can access a wide range of high quality construction training and upskilling. The announcement that roofing has been added to the Shortage Occupations List means that contractors will find it easier to access skilled labour from overseas, but in the long term the government needs to show that it is serious about preparing our domestic workforce to meet industry needs.”
Brendan Sharkey, head of Construction and Real Estate at MHA, says the lack of affordable housing is as big an issue for the economy as the “four Es” (Hunt’s pillars of growth – Enterprise, Education, Employment, Everywhere): “Unfortunately, the “four Es” 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.”
Meanwhile, the Builders Merchants Federation (BMF) has welcomed the raft of measures to support employees in the Budget, but is concerned that a lack of commitment to infrastructure projects, the construction of new properties and introduction of home energy-retrofitting measures could impact on the economic outlook for the industry.
With the building materials supply chain sector playing a significant part in the UK economy, the BMF had hoped to see more being announced to generate infrastructure projects, as well as new homes and a more energy efficient housing stock.
John Newcomb, CEO of the BMF, said: “We welcome measures which will help employees in the industry, including childcare support and changes to pension rules.
“Our members prioritised recruitment, staff retention, careers support, training and apprenticeships in a survey conducted recently, so extended free childcare and pension alterations can be positive factors in retaining and attracting new people into the sector.
“The new £9 billion policy of full capital expensing, initially for the next three years, will also allow firms to write off all investment against their tax bills.
“However, our concern is that budget constraints mean some infrastructure projects, particularly rail and roads, are likely to be delayed, cut or scrapped, which could impact our industry.
“Delays to HS2, and cuts to the Road-Building Capital Programme are being put forward, with no mention of support for getting the infrastructure pipeline moving.
“House building completion is also in slowdown, with local authorities reducing numbers in local plans, meaning 122,000 less homes will be built, a situation not helped by nutrient neutrality.
“The Chancellor could have also taken the opportunity to announce a National Retro-fit Strategy, which would support the installation of energy-efficient technology into existing dwellings, but there appears to have been no support for that.
“We need to see a commitment to decarbonising homes on the road to a Net Zero economy, as this will be crucial to achieving these sustainability goals nationally.
“The two major issues that affect our members are narrowing the gap between housing demand and supply, and the decarbonisation of heating and electrification of homes. We will continue to work with the government to address these issues.”
The Royal Institute of Charted Surveyors (RICS) noted that while this is likely a ‘safe’ budget, given the focus on growth, there are several areas in which the UK government could have further removed obstacles and supported our industries’ potential impact in boosting growth alongside driving sustainability.
Infrastructure and Net Zero
The expansion of the Climate Change Agreement for UK industry should also be welcomed, but businesses still require access to advice and the supply chain to achieve decarbonisation, which has proven a challenge in recent years.
Energy cost support
The reversal of a proposed increase to the energy price cap is welcome, however, as always with the quick policy fixes, the causes of high energy usage through retrofit and decarbonisation need addressing as an urgent priority. This is something RICS has repeatedly called for, and we’d be pleased to continue to offer our expertise in this area to the UK government. The Energy Efficiency Taskforce and schemes including ECO+ will go some way towards meeting this need, but not at the scale or pace required for meaningful change.
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.
Commenting on the Budget, Simon Rubinsohn, chief economist at RICS, said: “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.”
Levelling up and devolution
The re-ignition of investment zones in certain parts of the UK will stimulate regeneration but keeping alight the drive on other policies is needed alongside this. Updated planning rules, a business rates discount for new builds, and the need to maintain a focus on sustainability and quality are important for these zones to support communities in what they need and want while driving growth, because not everywhere aims to be a copy of Canary Wharf.
Additional funding for regeneration, and powers to be devolved to regional mayors, specifically the West Midlands and Greater Manchester, will create opportunities for more localised placemaking to be created, aligning with our Levelling Up and Sustainable Placemaking Report.