While the initial opinion of the Spring Spring Statement is that it has been geared more towards consumers, it is clear that there are some major implications for the construction sector, particularly from a sustainable perspective. We gauge some early reaction from leading industry figures here.
Phil Hurley, Chair of the Heat Pump Association:
“The Spring Statement comes with great news for the heat pump industry and households today. The HPA has been working hard behind the scenes calling for financial incentives to tackle the barriers to heat pump uptake, and the decision to cut VAT from 5% to zero on energy-saving measures is an important step forward. Whilst this decision alone will not be enough to enable all households to access technologies such as heat pumps, we are confident that it will play a role in helping to accelerate the switch to low carbon heat. But we must remember that more steps still need to be taken to support the rollout of heat pumps, including the removal of illogical environmental levies on electricity.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“The country is grappling with a cost of living crisis and today’s Spring Statement aims to give some breathing space to consumers.
“The financial challenges that people face will always trickle down to homeowners, those looking to get on the property ladder and those seeking affordable properties to rent.
“While energy price rises will increase the cost of powering our homes, the measures taken to cut VAT on environmentally friendly power sources and energy-saving insulation will give homeowners some relief going forward.
“Regardless of these initiatives, average annual inflation of 7.4% will hit people hard and reduce the affordability of mortgage and rent payments.
“Raising the national insurance threshold to £12,570 will give 30m people more money in their pocket to take on these challenges. Yet inflation isn’t set to be under control until 2024, and despite today’s pledge to cut income tax by then, the next two years are set to be a difficult time for many.”
Simon Bath, CEO of iPlace Global:
“Rental prices have already gone through the roof, and with the cost-of-living squeeze likely to worsen with the current economic turmoil Britain is facing, we will likely see less buoyancy around buy-to-let properties.”
Marc von Grundherr, Director of Benham and Reeves:
“The biggest personal tax cut in the last 25 years and an early election Budget for sure. With such headline grabbing announcements, the lack of property focus will easily slip through the cracks.
“That said, environmentally minded homeowners will welcome today’s announcement that VAT on green additions to their home will now be cut from the existing 5%. Of course, with inflation also being announced at 6% today, has this benefit already been negated?
“While great for the planet, solar and hydro energy outlets can be expensive to implement and take some time before the return starts to outweigh this initial cost and so it remains to be seen how meaningful this move will actually be.”
Michael Bruce, CEO and Founder of Boomin:
“A Budget with nothing much for housing but a little for the household itself and this was largely to be expected.
“The stamp duty holiday introduced during the pandemic was probably the biggest bone the government has thrown home buyers in recent times, so to expect another to come so soon after the final December deadline is certainly wishful thinking.
“Especially when house prices remain so buoyant as, after all, a high rate of house price growth is the government’s driving indicator of success and they’ll only stoke the fires when these flames are starting to fade.”
James Forrester, Managing Director of Barrows and Forrester:
“Such a bold move on income tax is of course welcome, but let’s not forget that this is somewhat diminished by an increase in both personal and employer national insurance, as well as the impending hike in corporation tax.
“This will cause further problems for homeowners across the nation who will have seen a sharp increase in the cost of running their home already this year, with both an increase in interest rates, rising energy costs and a jump in fuel prices all bringing additional financial strain.
“So while there’s been no real property initiatives announced today other than 0% VAT on energy saving initiatives, other announcements such as the cut in fuel duty and the increase to the household support fund will, at least, help reduce this overall cost of living.
“This should provide some small amount of breathing room for those that are particularly hard pressed at present, although it’s unlikely to solve the issue completely.”
Geoff Garrett, Director of Henry Dannell:
“Although there was generally no expectation that the property sector would feature in today’s Budget, some may have been hopeful of a breadcrumb or two from Mr Sunak in order to keep the market moving forward against what could be described as gathering financial headwinds.
“We’ve now seen a string of consecutive increases to the base rate and this is not only going to impact the monthly payments of those homeowners on variable rate mortgages, but it’s also going to reduce the bullish approach to borrowing that we’ve seen from homebuyers in recent years.
“The impact is likely to be a slowing in the rate of house price growth as buyers commit to lower borrowing amounts and sellers are forced to adjust their valuation expectations.”
Mark Robinson, Group Chief Executive at SCAPE:
“Despite strong tax revenues and a fall in borrowing, its ‘Budget-lite’ billing meant that the Chancellor’s statement was always likely to be lean on new spending. Critically, though, the public purse remains in a strong position to continue delivering the infrastructure investment needed to support local regeneration while addressing the cost-of-living crisis.
“As part of this, we need to see increased funding to support a nationwide approach to domestic energy efficiency – something we are actively campaigning for alongside the UK Green Building Council. All eyes will therefore be turning to the Prime Minister’s national energy strategy for clear direction on how the government intends to address long-term cost pressures within the construction industry.”
Mike Foster, CEO of the Energy and Utilities Alliance (EUA):
“The Chancellor has clearly not heard the outcry over rocketing energy bills faced by millions. He has done nothing in the Spring Statement to help the vast majority of consumers who face bills doubling this year.
“His VAT cut on solar panels and heat pumps will be welcomed by those who make them and by those who can afford to fit them, but a VAT cut on energy bills would have helped everyone.
“Frankly, consumers waiting to hear good news on their energy bills will be left asking, ‘is that it Chancellor?’”
Stephen Marcos Jones, CEO of the Association for Consultancy and Engineering (ACE):
“Rising inflation is the backdrop to the Chancellor’s update with the official forecast from the OBR peaking at around 9% in 2022. The resulting impact – coming after what have been two extremely challenging years – means difficult times ahead for all businesses in all sectors.
“Whilst our members may not be as directly exposed as those working in other sectors, inflationary increases affect every single company which is why we would have expected more proactive, immediate and targeted moves to mitigate current inflationary pressures on UK PLC.
“The review of UK’s approach to R&D investment, with a wider scope and promise of increased relief is welcome. Of course, the devil is in the detail, but this has the potential to stimulate more innovation from the private sector whilst contributing to higher productivity. Furthermore, we welcome the moves to review how the tax system and apprenticeship levy can be used more effectively to encourage greater investment by employers in adult training.
“We would like to have seen more targeted measures to support Government ambitions on Net Zero and Levelling Up. The Statement was a missed opportunity to drive progress in these areas and use them as catalysts for both economic growth and recovery.”
David Woolman, Director at Woolbro Group:
“Buried within the Chancellor’s Spring Statement today was finally confirmation that the Tories have all but abandoned their plans to tackle Britain’s housing crisis.
“While the government is right to prioritise the cost-of-living crisis, spiralling energy costs and the economic fallout from the war in the Ukraine, such bleak times shouldn’t be used as an excuse to sweep the country’s broken housing market under the rug by axing planning reform.
“Property prices are now at an all-time high, meaning many hopeful first-time buyers will struggle more than ever to get a foot on the ladder. And as inflation creeps up alongside energy and grocery costs, so too is the cost of renting, piling further pressure onto Britain’s already-squeezed ‘Generation Rent’.
“At the very least, the Chancellor should have today announced either an extension to or a replacement for the Help to Buy scheme, which comes to an end in March next year. With big housebuilders already looking to downsize the number of new-builds they deliver every year in the run-up to the scheme’s end, the government simply cannot afford inaction.
“A failure to act now on Britain’s housing time bomb will have detrimental impacts on countless communities across the country. The government has long prided itself as one that champions homeownership, but ministers today seem to care more about appeasing NIMBY backbenchers opposed to any form of new development in their constituencies.
“Time will tell as to whether a failure to address this housing crisis will exercise future generations of prospective voters, especially those who find themselves completely priced out of the property market.
Steve Radley, CITB’s Strategy and Policy Director:
“The inclusion of insulation in the statement today is of real interest for us and industry. Meeting Net Zero in construction is demand-led and the removal of VAT on energy saving materials is likely to cause a significant increase in the need for low-carbon skills.
“This tax cut will help to create the confidence industry needs to invest in retrofit training.
“The Chancellor said the government will be looking at the issue of employment training in the private sector, which will be reviewed as part of the government’s new tax plan, including assessing whether the Apprenticeship Levy is “doing enough”.
“CITB will continue to work with the government on apprenticeship levy reform as apprenticeships are the main route for employers in our industry to get the skilled workforce they need in recovery. Apprenticeship starts are recovering but it’s vital that we continue to drive numbers up. Critical to this will be building on recent reforms of the Apprenticeship Levy Pledge Service to ensure unspent levy funds from larger companies can be accessed by small employers to provide more apprenticeships.”
Bradley Tully, RICS’ Senior Public Affairs Officer:
“Our findings from the market suggest that the biggest barrier to improve the energy efficiency of homes is cost – 85% of respondents in fact.
“However, the road to achieving Net Zero always required the retrofitting of thousands of existing homes across this country to make them greener, and discounts for homeowners looking to support these ambitions have been a long time coming, so we’re delighted the Chancellor has finally listened to our call and taken action to cut VAT for families to retrofit their homes and drive down carbon emissions.
“Looking at the wider economic picture – including rising inflation – this poses a significant pressure for businesses, and while the business rate cut being maintained will help our highstreets, it does fall short from the widescale reform that they need to flourish.”
Chris Gardner, Co-founder of Atelier:
“With the cost of building materials surging once again, the Chancellor’s surprise tax cut on energy-saving technology offers a welcome safety valve – both to the construction industry and to homeowners looking to save money on their energy bills.
“The scrapping of VAT on vital, but still comparatively expensive, tech like solar panels and heat source pumps is a logical and popular response to the spike in energy prices that kicks in next week. But it will also offer long-term benefits to homeowners, the environment and UK energy policy.
“Every home fitted with solar panels can be one less home drawing power from Britain’s energy grid, and every home heated by an air source pump means one less boiler burning imported gas.
“While thousands of homeowners and housebuilders would fit energy-saving technology if they could, cost remains a major hurdle. The ‘green premium’ – the difference in cost between using the most energy-efficient versus conventional materials – is slowly reducing as the new technology is produced in higher quantities.
“But with building materials costs rising across the board, today’s 5% cut in the cost of energy saving technology suddenly makes it more affordable, and we look forward to running the numbers with our developer partners who want to go green.
“There’s no doubt that the market appetite for this technology is there, but developers and homeowners just need a nudge to embrace it fully, whether that’s from Government or from initiatives like Atelier’s Carbonlite Challenge, which offers significantly discounted finance to developers who use sustainable, low carbon designs.”
Cara Jenkinson, Cities Manager at Ashden:
“If the government really wants to build a stronger and more secure economy and tackle the cost-of-living crisis then then they must invest now in training thousands of people to roll out an urgent nationwide campaign of energy efficiency measures, such as retrofitting housing, and installing heat pumps. The cut to VAT on these measures is welcome, but not enough to drive the scale of change needed.
“A rapid ramp-up of home energy retrofit to protect people from rising energy prices requires a huge upskilling of the existing construction workforce and investment in colleges to train a new generation of builders and heat engineers, but unfortunately there was no new skills policy, simply a promise to review the apprenticeship levy.
“An extra £500m of household support will do little to help millions of people in fuel poverty. Instead, the chancellor has chosen to help motorists through the fuel duty cut, which flies in the face of net zero targets and mostly benefits wealthier people.”
Derek Horrocks, Chair of the National Insulation Association:
“Insulating homes is essential to the success of the Government’s plans to reduce carbon emissions in line with climate objectives, but we know that measures are not being installed on the scale required to reduce energy demand in homes and tackle the cost-of-living crisis. The VAT cut on energy efficiency introduced by the Chancellor today could make a strong contribution to tackling the cost barrier to energy efficiency improvements in the UK, but the NIA welcomes the decision with caution that other financial support will be needed for homes where this incentive is not the right solution. Taking a whole-house fabric first approach will help to ensure that homes are fit for low carbon solutions be it immediately or some years later so it is great that the VAT cut will apply to an array of solutions.”
Richard Beresford, Chief Executive of the NFB:
“The NFB, along with many others in the industry, has repeatedly, over many years, called on the Treasury to remove the VAT on measures which improve energy efficiency. To us it always seemed like a ‘no-brainer’ to help incentivise the public to ‘green’ their homes and meet our country’s Net Zero ambitions and today we can finally welcome the decision the Chancellor has taken, it is long overdue but at last it is here.
“As inflation is set to go above 7% this year, and the Government confirmed its intention to levy a further 1.25% of national insurance contributions on employers, the cost pressures on construction businesses are unprecedented. While the fuel duty cut is welcome for the country at large, the reality is that in construction, the effective rate of duty is set to rise by 47p per litre because of the removal of entitlement to use Red Diesel. The decision not to delay this will hurt businesses at the time when they most needed respite from rampant inflation.”
Mark Perry, Chief Executive at VIVID:
“The Chancellor’s announcements today are a disappointing response for those most severely affected by what’s been described as the cost of living crisis. This is a missed opportunity. Whilst the increase in national insurance threshold and fuel duty reductions might help those in work, those that aren’t working won’t see any of the benefits. I think the OBR has suggested that in real terms it forecasts the highest reduction in disposal income since record began, in 1950!
“With the economy £20bn ahead of where we expected it to be, surely the government could have used some of that to help those most struggling. Perhaps reinstating the £20 per week Universal Credit cut that took place last year, basing the inflation rate used to uplift benefits to the position it is now at 6.2%.
“The measures announced today won’t really help the reality of what our customers are experiencing when say their small £20 per week budget for food and household essentials used to get them 20 items and will now only just stretch to 17. More needs to be done.”