A full round-up of industry reaction to today’s Budget announcement
The industry has responded to George Osborne’s budget today.
Budget 2013: industry reaction on…
National Housing Federation chief executive David Orr says: “We welcome the Chancellor’s realisation that people around the country are struggling to buy their own homes, and the measures introduced today may help a number of them.
“But the danger is that if we don’t tackle the fact we’re still not building enough homes, we’ll just create another housing bubble that will continue to push house prices up and out of reach of the majority.
“The Government should be focusing on unlocking investment to build more new homes as a way of managing down the housing benefit bill and boosting the economy. We welcome the measures to support new supply but they are very small scale.
“And we still need the Government to help unlock land banks, free the small publicly owned derelict sites so we can build houses on them and give housing providers long-term certainty over how much income they can expect so they can start planning and building beyond 2015. With the impact of welfare reform still to be fully felt, we need reassurance and long-term commitment so we can play our part in raising the finance needed to build more homes.
Stewart Baseley, executive chairman of HBF said: “A lack of affordable mortgage availability remains the biggest constraint on housing supply, something Government now clearly understands and is looking to address.
“Extending NewBuy to the second hand market should create churn in the market place and drive up sales across the Board - including for new homes. We do though need to ensure a level playing field across the whole market. Extending FirstBuy is very welcome and will provide a real option for people currently unable to buy - so providing a vital market for the new homes industry.
“Building the homes the country desperately needs can be a key driver of economic activity. Government must be praised for its attempts to stimulate activity, but must also be wary to get the details right.”
Richard Threlfall, KPMG’s Head of Infrastructure, Building and Construction, said: “The Chancellor’s ‘Help to Buy’ scheme looks like the perfect “get out of jail” card. It’s a bold move, perhaps a desperate one, but one that will be undeniably welcome by the beleaguered construction industry.
“The Government has finally recognised that housing might offer the fastest acting pain relief for our economic woes and, perhaps despairing of local authorities to be proactive in supporting new house building, has decided to focus stimulus on demand.
“By opening the scheme to all buyers of new-build houses up to £600,000 in value, the Chancellor has thrown the UK house building industry a new lifeline. Ultimately, the construction industry and all trades that support construction of new houses in the UK will benefit from the new scheme.”
Mark Farmer, hed of residential at EC Harris, said: “Probably the most single important announcement in The Budget must be the introduction of the ‘Help to Buy’ scheme. Specifically aimed at freeing up what is still currently a dysfunctional housing market outside of Prime London, it will enable anyone (not just first time buyers) to access low deposit mortgages through equity loans and mortgage guarantees.
“It appears that the government has realised the importance of both the housing and construction sectors to the wellbeing of the UK economy and its fundamental multiplier effect. The scale of the ‘Help to Buy’ initiative is impressive, with £3.5 billion being allocated for equity loans alone and £12 billion of mortgage guarantees being provided. £1.3 billion of investment will be designated for 2013-2014 so this is significant and it is quick to market - probably looking to maximise political and economic impact prior to the next election.”
Angela Brady, president of RIBA, said: “Although the announcements today for further spending on housing and infrastructure are to be welcomed, it will barely make a dent in the delivery of the sustainable new homes and communities we desperately need.
The UK is in the grip of the worst housing crisis for decades yet committing to build only a tiny proportion of the 300,000* new homes that are needed each year to meet demand. The private sector has only ever delivered around 150,000 homes a year, so whilst today’s Help to Buy announcement will enable greater access to mortgage finance, it does not sufficiently address the root cause of the housing crisis: we are not building enough homes, many of those that are being built aren’t good enough, and we cannot rely on private housebuilding alone to turn things around.”
Jonathan Hook, PwC’s Engineering & Construction leader, said: “For construction, the big news for the sector is the Chancellor’s bet on the housing market with the Help to Buy scheme. The commitment of £3.5billion to shared equity loans up to 20% coupled with £130 billion of mortgage guarantees is a big boost to the residential market. The chancellor obviously believes this a quicker and cheaper way to get an economic boost than other areas of capital spend.”
Ben de Waal, Head of Residential, Aecom, said: “The introduction of “Help to Buy” will provide interest free deposits potentially helping to fund 25,000-30,000 homes per annum over the next 3 years. This is great news for the volume housebuilders, will give confidence to the Registered Providers to use market sales to cross subsidise social housing and will realise the potential to own your own home to thousands of people who may otherwise have been excluded.
“The flip side is the implication that the private rental sector is unlikely to receive significant political support. Is the Government in danger of setting a dangerous precedent of subsidy to fund home ownership? This is not sustainable in the long run so we come back to the need for a more diversified housing supply that embraces renting as acceptable rather than simply for the “can’t affords’. This budget has in many ways reinforced the negative stigma associated with renting at a time when the market for institutional grade, high quality service orientated housing is just beginning to take off. Poor timing.
“Disappointing that there was no mention of Local Authority debt caps being raised to help them fund new homes. Clearly the impact on the UK balance sheet is considered to be too great but it ignores that from a delivery point of view the Local Authorities are very well placed to fund a major programme of new housing on land already within their ownership.”
£3bn a year increase in infrastructure spending from 2015-16
Simon Rubinsohn, RICS Chief Economist, said: “Our members have told us repeatedly that the success of infrastructure projects are about delivery on the ground. RICS believe Government should spend more time and resource in supporting business to gain access to these public sector projects.
“The Government has largely failed to realise that infrastructure projects don’t need to be big to be effective in creating growth. In fact small might very well be beautiful. Across the regions and the nations it’s the smaller repair, maintenance and upgrade projects which can be picked up by medium and small construction businesses. Rail maintenance and school refurbishment are just two areas where a small amount of capital investment would quickly deliver great benefits.”
Richard Abadie, PwC Global Head of Infrastructure, said: “Every additional pound of investment in infrastructure is to be welcomed in a difficult market where the construction industry is struggling from reduced activity. Infrastructure projects are long term and investments made into them also need to be long term and ongoing.
“Regrettably the announced sum is insignificant relative to the infrastructure backlog and whilst we welcome the announced £3 billion of cost-savings from various Government departments, the reality is it won’t make a significant impact on economic growth as it comprises less than 0.2% of GDP.”
Duncan Symonds, UK Head of Infrastructure at global consultancy WSP, said: “It’s disappointing that the Chancellor’s recognition of infrastructure as the ‘economic arteries’ of this country wasn’t backed up by more detail on the ‘how’ and ‘when’ they will be unblocked.
“£15bn extra funding is a welcome injection but it is realistically a small contribution to the £50bn needed by treasury’s own estimation, and most importantly, it will be futile if not backed by clear commitment to the programme, more detail on the delivery and support from the private market - so far not readily forthcoming. Lord Deighton’s role in the delivery of projects is therefore very good news, as is the increased use of independent advisors.”
Kate Orviss, infrastructure partner at Pinsent Masons, said: “Today’s announcement by the Chancellor yet again started full of promise as he repeated his commitment to the sector. However, it ended up being disappointing notwithstanding the announcement of an additional £3 billion for the sector. The disappointment is that this funding will not be available until 2015-16 and there is a complete lack of clarity over what it will be spent on. This time the real detail will not been revealed until June.
“The Chancellor was right to point out that we are in a global race for investment and jobs. Sadly the lack of real opportunities announced by this Government leaves the UK less and less attractive in the global market.”
CECA director of external affairs Alasdair Reisner said: “By delaying significant infrastructure spending until after the next election, the Chancellor has offered a ‘jam tomorrow’ Budget, that will do little to boost growth through infrastructure provision before 2015.
“While CECA welcomes commitments to an additional £3bn in infrastructure investment post-2014/15, the majority of this period will be after a General Election and is therefore hostage to fortune with any change in government. What we really need is activity on the ground now, and our initial view appears to suggest that there has been no new support in the short term for infrastructure construction.
“Before today’s statement, CECA had called for further details on the UK Guarantees Scheme, which was proposed as a method of unlocking major infrastructure projects. It is disappointing that the Budget contains no new details of projects that are to be funded by this method.
“In more positive news, the Budget document also indicates that the Government’s spending review in the summer will offer a long-term view of capital investment. We also welcome the Government’s increasingly rigorous approach to infrastructure delivery, including the creation of an enhanced central cadre of commercial specialists in Infrastructure UK who will be deployed into infrastructure projects across government.”
Nick Baveystock, ICE director general, said: “The drawn out process of the Electricity Market Reform, and the scaled down hopes for investment from sources such as pension funds, show there is an urgent need for Government to improve its role as a facilitator of investment. We therefore welcome Government’s commitment to consider options for using independent expertise to help shape it’s strategy – and urge them to engage with the work of Sir John Armitt’s independent review which is looking at this issue.”
Steve Bratt, ECA chief executive, commented on the infrastructure spending increase: “A change in credit rating means we must have a change in policy. We cannot afford to enter a triple-dip recession. The Chancellor’s announcement that £3bn a year will be allocated to fund investment in infrastructure spending is what we’ve been waiting for. That cash must help kick-start shovel ready projects within construction that will lay the foundations for a longer term revival.”
Paul King, chief executive of UK-GBC, said: “George Osborne’s re-commitment to zero carbon homes from 2016 is the one shining green beacon in today’s Budget. The fact that it’s there is welcome and important, but it looks very solitary in a Budget otherwise devoid of support for green growth, with even the Government’s flagship Green Deal failing to get a look in.”
David Symons, UK director at WSP said: “It’s good news that today’s budget re-confirmed that all new homes will be zero carbon from 2016. But Government has barely started to make Britain’s 6 million existing homes energy efficient and today’s Budget is a missed opportunity to really help kick start underfunded policies such as the Green Deal.
“Support to energy reducing jobs would have helped massively expand the 60,000 registered plumbers and builders who are ready to start work right now, and can be contrasted to the 5000 jobs which shale gas in Lancashire will create by 2020, and which benefited from today’s tax breaks.”
Angela Brady, RIBA president, said: “Government should act as a catalyst for sustainable construction growth where the market is failing to deliver. Today’s Budget was the opportunity to kickstart a major programme of capital investment in new affordable homes and to lay the foundations for the green economy - on both counts the Chancellor has failed to deliver.
“We weren’t expecting a game-changer budget today, but this country desperately needs one.”
Tim Goodson, senior consultant, energy, Aecom, said: “Lip service may have been paid to the low carbon economy but the main policy changes are concerned with encouraging investment in the North Sea and burgeoning shale gas industry. As with previous announcements regarding energy policy, we are still waiting for the details to emerge.”
UK Guarantee Scheme
Dr Nelson Ogunshakin OBE, chief executive of ACE, commented on the lack of clarity on the UK Guarantee Scheme: “The National Infrastructure Plan and the development of tools such as the UK Guarantee Scheme show a strong government commitment to upgrading the UK’s infrastructure and getting the economy growing again. Delivery of this kind of work can take time however, and it is important that government takes steps to say more and provide industry and investors with the certainty it needs to invest and turn strong intent into work on the ground.”
Brian Berry, chief executive of the FMB, said: “We needed a ‘Budget for Housing’ to address the acute shortage of affordable, energy-efficient homes in the UK. The Help to Buy package is aimed at stimulating the underperfroming mortgage market, which could provide a boost to all firms involved in house building, renovation and repair. But changes to the FirstBuy scheme will be of limited assistance if it remains too costly and complex for smaller developers, who deliver a third of all new homes.
“If Ministers want an industry-wide boost to jobs and growth while delivering desperately needed new homes and meeting energy-efficiency targets, we need bolder measures such as cutting VAT on domestic repair and maintenance work, and reducing the regulatory burden which discourages so many small developers from even contemplating building new homes.”
David Stevenson, managing director at consultant Edmond Shipway, said: “This is not a budget to make the heart leap, as the Chancellor said it’s all about plans for the future.
For those SME’s working in construction, that is the bulk of architects, consultants and contractors the infrastructure projects will have little impact. What about stimulus by funding the repairs and maintenance budget for schools for instance, this would have had a real short term impact. In truth, until such time as the banks have rebuilt their balance sheets and begin to lend outside of London where values have held up we will not see a private sector recovery.”
Stephen Ratcliffe, UKCG director said: “There is some good news for the industry notably, the increases announced in public sector infrastructure investment, new help and guarantees on mortgages and a commitment to publish a longer term investment pipeline (to 2021) covering the most economically valuable areas of the economy. But the extra spending on infrastructure will not start to bite until 2015.
“What the construction industry wanted most of all was more assurance that government is focussing on delivery of projects but there is little detail about for example what the Treasury guarantees (announced last summer) haveachieved and how deal flow in the public sector pipeline will be speeded up. The promised review of Whitehall’s capability to deliver projects will bring no immediate changes.”
Richard Steer, chairman of Gleeds, said: “My overriding feeling is one of great pessimism, I am afraid this budget has as much credibility as the ingredients list on supermarket Beef Lasagne. So many previous targets missed, so many previous incorrect forecasts and a limited infrastructure boost that looks good on paper but so did the £4.7 billion of capital expenditure promised in 2011 and the £5.5billion promised the year after that has yet to make an impact.
“The new announcements on housing lending may grab the headlines but, frankly, this is not a large enough part of the industry to help do more than further boost the house builders share prices. We have 400,000 jobs lost in construction since the downturn and 8 contractors disappearing every day - I just don’t see the immediate stimulus needed from today’s announcements.”
Jon Sealy, UK managing director, Faithful+Gould, said: “I agree with the Chancellor that reform of the planning system is the most important thing we can do to bring more efficient handling to major infrastructure projects.
“The extra £3 billion a year that will be spent on infrastructure from 2015/2016 is also hugely welcome but Government departments will need further help rationalising their property estates if they’re to deliver the extra £1.5bn of cuts being requested to help fund future spending.”
A single pot of funding for Local Enterprise Partnerships (LEPs).
Dr Nelson Ogunshakin OBE, chief executive of ACE, said: “Local Enterprise Partnerships (LEPs) have brought together an excellent array of stakeholders, including universities, local authorities, employers and developers. However, until now the finance available for the LEPs has been restricted and this has hindered their progress in generating growth locally. Industry, which has been keen to engage, will be pleased to hear that government is investing, but given the scale envisaged by Michael Heseltine’s ‘no stone unturned’ report, this announcement must serve only as a stepping stone towards greater detail on the government ambitions for the LEPs.”
Andrew Stevenson, head of infrastructure, Davis Langdon, an AECOM company, said: “The upside for those in infrastructure were the words of comfort for continued spend. That said, there wasn’t any detail was there? The Chancellor did say it’s taking longer than expected but we will have to wait until June to get an understanding of the spending plans; it feels too high risk to use ‘hope’ for something then as a good news story for infrastructure.
“Lord Heseltine continues to herald the hopes of those in the regions outside London. We need to look to the regions now to bring forward their nation-changing projects to book-end centrally promoted programs for continued reinforcement of our growth backbone.”
Five-fold increase in funding for ‘build-to-rent’ to £1bn
Ian Fletcher, director of policy at the British Property Federation, said: “It’s encouraging the Government’s confidence in build to rent has been reciprocated and we are delighted to see that the equity funding was heavily oversubscribed. Working in partnership with Government the sector should deliver an exciting and quality array of homes for renters.”
Diana Montgomery, Chief Executive of the Construction Products Association, said: ‘We particularly note four proposals that the industry will find practical and immediately beneficial; first, the exemption next year of the ceramics, cement, steel, minerals and glass sectors from the Climate Change Levy; second, a new Employment Allowance which will largely help our SME manufacturing base; third, an increase to 10% in the rate of the above-the-line R&D credit together with a 10% tax on profits from patents; and lastly, a cut to the corporate tax rate ensuring the UK will enjoy the most competitive tax regime of any major economy in the world.
Jon Hart, Infrastructure Partner at Pinsent Masons, said: “There were fairly high level omissions from the Chancellor’s speech today. The absence of any reference to the Treasury’s successor model PFI, rebadged “PF2” was just one clear omission.
“Since its launch in December last year, there has been a conspicuous absence of any concrete commitments to its use. The MoD has announced that it won’t be using it – and the government’s own approaches to the capital markets in relation to the Priority Schools Building Programme suggests that the Department for Education may have some doubts too.
“At the moment, this would appear to leave just the Sandwell Hospital project as a PF2 scheme heading for procurement.
“Is this going to be the most unloved procurement model in the history of Project Finance? Only time will tell – the budget documents suggest that this like so many other aspects of infrastructure spending will be the subject of the June Public Spending review announcements, which almost raises the question as to what the purpose of the Budget is – unless to provide headlines for the Evening Standard and an opportunity for our elected members to demonstrate their oratorical and debating skills.”
Attracting institutional investment
Dr Neil Blake, Head of UK and EMEA Research, CBRE said: “Despite additional promised funding, not nearly enough measures have been taken in this budget to get institutional investment into infrastructure and ensure the delivery of more residential stock.
“Initiatives of this type have been announced before but have stalled. If they were introduced they would provide a win-win policy for the government as it could secure funding for its infrastructure programme and boost demand in the economy at the same time, whilst institutions could get liability matching assets. Further action is urgently required to close the gap between the two parties.
“Getting institutional money into residential development would not only boost demand but it would help to address the UK’s chronic housing supply problem - which saw house building barely match demographic trends at the peak of the boom, never mind in these depressed times.”