The Construction Industry Reacts to the Spring Budget

Posted by Construction Industry News Magazine on 17th March 2023 -

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.”

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