April 13, 2021

UK construction sector reacts to the Budget

While it will still take some time to digest all the implications of Chancellor Rishi Sunak’s Budget, here we gauge the reaction from a number of figures across the construction sector in order to get an early consensus.

John Newcomb, CEO of the Builders Merchants Federation

“The Chancellor largely struck the right notes in announcing continued support for business as we move through the final stages of the coronavirus roadmap and plan for recovery. 

“We were particularly pleased that the Chancellor sought to support smaller businesses by recognising the need for continued furlough support and business rates discounts, which will help our SME members as they return to pre-covid levels of operation.  Similar extensions to self-employment grants will help small builders and other trades who form the main merchant customer base and ensure they are still in business to service the needs of homeowners helped by the new government-backed mortgage guarantee scheme and the extension of the Stamp Duty Holiday.

“We also welcome the announcement of a new UK Infrastructure Bank which was a key ask of our Construction Leadership Council colleagues, and noted the reference to investment by construction firms in the Chancellor’s announcement of his Super Deduction tax initiative.  Clearly, he is looking to the construction industry to help drive economic recovery.

“However, while the Chancellor spoke of the Government’s commitment to Green Growth, we were disappointed that this announcement did not include support for a National Retrofit Strategy.  This would not only upgrade the country’s housing stock to the highest levels of energy efficiency, but would also provide a platform to upskill the building trade with skills required both to retrofit existing homes and build low carbon new homes, helping to achieve the Government’s Net Zero ambition.”

Jon Bower, planning partner at WBD

“This is a welcome step and builds on the National Infrastructure Strategy using infrastructure to support levelling up and regeneration.  The pandemic has added a layer of complexity on our urban and suburban centres and the National Infrastructure Commission’s study will be an important part of this.  As we have seen from previous NIC studies their recommendations carry significant weight and we look forward to seeing this progress.” 

Dan Hajjar, Managing Principal, HOK’s London Studio:

“The Chancellor is right to extend the emergency measures needed to support businesses and protect jobs, but the Government must hold its nerve and press forward with major infrastructure investment to give real impetus to the recovery.

The Government has pledged to Build Back Better and despite the fiscal cost of the pandemic major projects such as HS2 and the hospital-building programme must be prioritised, as they will deliver socio-economic benefits across the UK. The creation of the UK Infrastructure Bank is a positive step as more support is needed for projects in sectors such as renewable energy, carbon capture and storage and transportation, to reduce the built environment’s negative environmental impact and achieve net zero targets.

The elephant in the room is Brexit and the continuing uncertainty about how professional services firms based in the UK can operate in Europe, including architecture and design practices. Businesses of all types need certainty to invest and the Chancellor has missed an opportunity to provide some much-needed guidance on how those affected should be preparing for this transition.”

Paul Reilly, Association for Consultancy and Engineering (ACE) Chairman

“Our members are at the heart of the digital transformation that will make the ‘better greener faster’ built environment investment the government aspires to a reality.  The ‘super-deduction’ for business investment will support the investment in digital capability our firms needs to make.  The increase in the apprentice fee will enable us to invest in the skills of young people so that they can be part of this revolution.” 

Clive Docwra, managing director of property and construction consultancy McBains

“We recognise the Chancellor’s hands were tied by the extent of the Covid crisis, but – unless there is anything in the small print of the Red Book – there was little specific announced for the construction sector given that the government has made ‘build back better’ its mantra for recovery.

“The ‘super deduction’ in tax may encourage construction firms to invest, while the reintroduction of 95% mortgages, and extending their availability beyond first time buyers, could trigger a revival of the housebuilding sector.

“But we’re disappointed that it appears green retrofit schemes, such as the Green Homes Grant, were not renewed, as such programmes not only help contribute to carbon net-zero targets, but provide a lifeline to many construction firms in terms of maintenance contracts.  On a macro-level, we’d have also liked to have seen a bigger commitment to wider green initiatives to help encourage the industry to move towards net-zero.

“And while the Chancellor may have introduced a fast-track visa scheme for high-skilled workers in the tech sector, we’d have welcomed similar applying to the construction industry, because a combination of Brexit and Covid has led to an exodus of high-skilled construction workers from the EU and elsewhere.  The doubling of payments to employers for taking on trainees may encourage more firms to take on replacements, however.”

Olivia Harris, Chief Executive of Dolphin Living

“It is absolutely right that the government continues to focus on protecting jobs in London, especially within the key sectors of hospitality and tourism, as we hopefully approach the end of the pandemic. However, as we look to the longer-term recovery it is more important than ever that those working within these industries, and our city’s vital key workers, have access to housing which is both affordable and located close to their place of work. Therefore, we are calling on the Chancellor to commit to a once in a generation expansion of affordable house building within London. This must include a significant proportion of intermediate rental housing for those critical workers who are unable to afford local market rents upon whom London relies, as part of the overall pledge to support the capital’s social and economic recovery post the pandemic and level-up the city.”

Dr Neil Bentley-Gockmann, CEO of WorldSkills UK

“The Chancellor has set out an ambitious vision for rebuilding our economy which represents a significant opportunity for the skills sector.

“Continued increased investment in traineeships and apprenticeships is very welcome and if the recent Skills for Jobs White Paper has given us the framework for delivering the high quality skills that employers need to power economic growth, the Budget provides a challenging target to aim for. With a new infrastructure bank to encourage investment, plans for port developments for more offshore wind, freeport enterprise zones and city deals to encourage local economic development and job creation, it is clear that higher quality skills will be needed in all parts of the UK to turn these plans into reality.”

Mark Robinson, group chief executive at SCAPE, the UK public sector procurement authority

“The Chancellor’s latest package of support and reforms represents an opportunity to breathe new life into those areas of the country most-affected by the pandemic. Significantly though, the plan to address the debt burden won’t be at the expense of public sector investment, which must continue at pace if we are to truly build back better through community regeneration. 

“Local authorities and contractors alike will be most interested in the detail around the government’s new National Infrastructure Bank. It will no doubt play a central role in supporting the levelling up agenda and unlock potentially transformative projects. However, there is a pressing need for it to move at speed to generate momentum and create the best conditions for local economic growth and sustainable inward investment.

“Delivering these projects efficiently relies on access to a high-quality pool of labour. New visa pathways and green bonds will play an important role in ensuring the UK takes a lead on sustainable design, but more is needed to support apprenticeships and those starting a career in construction.”

Lee Pickett, partner and housing law specialist at global legal business, DWF

“Whilst this will be welcome news for the housing market, it will also be met with caution as it merely kicks the can of the withdrawal effect down the road a little. We have certainly seen developers concerned about unhappy customers who, through no fault of theirs, would miss out on the SDLT holiday due their new home not being ready for legal completion in time. Equally, various supply chain and labour availability pressures resulting from the pandemic and/or Brexit, are likely to be key factors in developers being unable to deliver homes before expiry of the SDLT concession period. 

“There is an alternative view that the market was functioning well enough when the SDLT holiday was introduced and it simply pushed up prices, removed the advantage first-time buyers had and reduced tax revenue at time when it is most needed.  Perhaps the compromise might have been to distinguish between transactions and chains involving new build properties and those which only involve existing housing stock. That, however is not what the Chancellor has decided to do and perhaps that is to do with simplicity of application among other factors.”

Neil Sherreard, director at Beard

“Extra investment in training is certainly something to welcome as we look ahead to the future of our industry.

“The investment in training today will shape the sector of tomorrow and it’s always been an important part of Beard’s culture to help bring on the skills necessary through our own training schemes.

“The increase in apprentice payments will help to strengthen those schemes and the idea of the ‘flexi-job’ apprenticeship is an interesting development. If apprentices are able to move around different employers within the sector they will certainly get a deeper insight into how different firms operate and the broad range of projects we cover as an industry.

“But it does present some questions around who is ultimately responsible for their development as some firms may feel that investment is wasted if they decide to go elsewhere.

“However, in the short term, the introduction of the ‘super deduction’ tax incentive for companies with cash reserves to invest in new materials and create jobs, will be a significant development for construction firms’ finances.

“During the past 12 months it’s been clear that financial responsibility as a business is of paramount importance, being a prompt payer, treating suppliers and subcontractors fairly and having the right financial controls in place are key.

“This is a tax incentive that rewards that financial management and will help the sector to continue its progress out of this current national crisis.”

Tom Brown, Managing Director of Real Estate at Ingenious

“The Chancellor’s decision to extend the Stamp Duty Land Tax (SDLT) holiday and provide a Government-backed guarantee to mortgages with deposits of just five per cent reflect the importance of maintaining optimism in the UK housing market. This level of support shows that the Government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained. The support provided by the SDLT relief extension, saving up to £15,000 on property purchases of £500,000 is positive news for our strategy as an alternative lender focused on the affordable end of the market.

David Thomson, head of external affairs at Association for Project Management(APM), the chartered body for the project profession

“This budget was all about the difficult balancing act of investing for long-term whilst safeguarding the economy through the immediate Covid crisis. The success of this budget will be judged not just against tomorrow’s headlines but against the impact of sustained national and local delivery of major programmes of activity, and in particular: post-Covid recovery, a focus on levelling up and the need to deliver on Net Zero commitments. But these and other initiatives identified by the Chancellor will require investment in project delivery capacity and capability for a sustained period if they are to address successfully these and other emerging challenges.   

“Good project outcomes require the right conditions for success. Any announcement of new initiatives must be matched by the capability and commitment to deliver them well, as the vaccine programme is demonstrating.”

Donald Morrison, Jacobs’ People & Places Solutions Senior Vice President Europe and Digital Strategies

“The creation of a new National Infrastructure Bank will play an important role in supporting new infrastructure technologies, help to reduce uncertainty and has the potential to accelerate financing to free up large-scale investment across the UK. However, we also need to carefully consider how to design and integrate infrastructure that will be of long-term benefit to all – environmentally, socially and economically. The Government must follow through on its commitments to take into consideration not only how best to invest, but where the structural support will result in the most benefit. An ‘outcome-based’ model for infrastructure planning, one that has social value embedded at its heart, will be essential in ensuring the UK can build back better in a way that is truly committed to ‘levelling up’ and the transition to net-zero.”

Alan Laing, Managing Director for UK & Ireland at IFS

“This is clearly a budget designed to put a shot in the arm of the economy, and to drive growth, productivity, and secure jobs over the short term. In that regard, there is much to be positive about, but it remains to be seen whether the measures laid out will have the desired effect and what the longer-term strategy will be.

“Core elements of the UK economy, including the construction, manufacturing, and life science sectors will find some measures encouraging – notably those that look to boost new housebuilding, and the ‘super-deduction’ tax relief for investments in technology and equipment. The funding increase for digital skills, apprenticeships and trainees is also a positive step and will go some way to both addressing the skills gap and the current levels of unemployment. These measures should help to create secure jobs, address the shortage of affordable housing, and provide manufacturers with the encouragement they need to invest in UK operations and facilities – particularly if they can also reap the benefits of the eight new freeports due to be established across the country.

“The Chancellor has also recognised the need to do more to realise our net zero ambitions and promote investment in cleaner energy and the circular economy – however, measures in this area fall far short of those needed to bring about the kind of change needed to hit our current sustainability targets. This budget should always have been focused on balancing the short and long-term needs of the country and economy, rather than balancing the books over the course of this parliament. Only time will tell whether the Chancellor has gone far enough, or whether internal party politics has hindered efforts to ‘build back better’.” 

Brendan Sharkey, Head of Construction and Real Estate at MHA MacIntyre Hudson

“It is rare to listen to such an encouraging budget and confidence will have increased markedly across the construction sector after hearing the Chancellor speak. The extension of Stamp Duty relief makes perfect sense given the backlog of housing purchases. The tapering of relief through to April 2022 takes the angst out of deadlines while stimulating the number of transactions and new builds, which is all good news for the economy.

“In fact, when this is combined with the Chancellor’s new government mortgage guarantee scheme we could see an unprecedented rush to buy. So the only question is whether the developers can meet the demand as it takes time to bring stock to the market.

“Finally the super deduction scheme will be a real shot in the arm for businesses looking to invest; those investing will be able to reduce tax that is paid and presumably where tax losses are sustained they will be carried back. This could prove to be the stimulus for offsite manufacture to increase volumes of houses built as well as modern methods of construction.”

Jordan Rosenhaus, Chief Executive at modular housebuilder TopHat

“I welcome Rishi Sunak’s green-tinged Budget, but it was disappointing to see that policymakers are still failing to address the problems caused by consumers’ unwillingness to change old habits – especially in relation to how they live in their homes.

“Changing decades-old habits is not going to be easy, but it is vital. The Committee on Climate Change estimates that costs to green the UK’s housing stock will reach £11.7bn of average annual investment over the next 30 years. However, the same organisation also calculates that from mid-2040 savings in operating spending – e.g. how much cheaper it will eventually be to run a home’s heating system using air source heat pump instead of a gas boiler – will start to exceed the annual investment.

“For a step change to happen now it will require a cocktail of Government grants and incentives – not like the Green Homes Grant, which has crashed and burned, but more like basing a home’s council tax bill on its energy performance. Lower Stamp Duty for properties with higher Energy Performance Certificate ratings is also an example of how to encourage developers to improve the energy performance of their new homes. This would echo the tax incentives available to the motor industry and electric cars.”