The Autumn Statement provided a bit of unexpected Christmas cheer. Or did it? On balance I think it was a good start
The Autumn Statement provided, prima facie, some encouragement for the construction industry; a bit of unexpected Christmas cheer.
Or did it? On balance I think it was a good start but judgment should be reserved until the finer details are ironed out.
Private housebuilders were the biggest potential beneficiary of the statement with further incentives to boost demand for new housing in the UK. The government clearly sees the route to solving the housing crisis in the private sector, with a promise to create 400,000 “affordable” homes built by the traditional housebuilders.
Private housing has been the main source of growth in the industry over the last two years and the guarantee of further stimuli means that this should remain the case
The Help to Buy scheme is now firmly ingrained in the housing policy landscape in the UK and it looks like it is here to stay. The key question about policies such as this, which is even more pertinent given the recent announcements, are whether they give rise to any “additionality” - whether these houses would have been built anyway or they are genuinely “additional” housing stock? It is open to political fudging but the proof of its success will be measurable in housing completion figures.
Infrastructure was also given a boost in the Autumn Statement with a commitment to double the capital budget over the lifetime of the parliament. Potentially very encouraging for the prospect of the sector but this is also combined with big cuts in administration budgets which may make it hard to actually deliver the schemes that have been proposed.
This is set against a backdrop of a construction sector that slowed in Q3 this year but there have been signs that this trend has reversed in the final months of the year. This means that I remain confident in the sector’s prospects as we enter 2016.
Private housing has been the main source of growth in the industry over the last two years and the guarantee of further stimuli means that this should remain the case. When combined with committed funding to infrastructure, the two elements provide a strong platform for growth.
Of course there are always bumps on the road but with the certainty provided in housing and infrastructure another year of growth beckons for the industry.
Michael Dall is an economist at Barbour ABI