Construction industry reacts to tax and expenditure changes announced in the Emergency Budget

Figures in construction have begun to respond to George Osborne’s speech today, with the following comments:

Capital spending

“RICS welcomes the government’s decision not to reduce capital spending beyond the cuts announced in the March budget.  The construction industry is a powerful engine of growth, and we had emphasised in our emergency budget submission that any further cuts in capital spending would have undermined the tentative economic recovery.

Mark Goodwin, RICS director of external affairs

“Buro Happold is relieved that capital spending is being substantially maintained, not only for the good of the industry but also to benefit our next generation and UK PLC as a whole.  However this still leaves the industry desperately needing clarification on the status of pending and future BSF and Academies projects to ensure industry confidence is not further dented.”

Dr Mike Entwisle, associate director at international multidisciplinary engineering consultancy Buro Happold

Tax changes

“Cash strapped homeowners will be more likely to resort to ‘cash-in-hand’ traders in order to avoid adding 20 percent to the cost of keeping their home in good condition.”

Richard Diment, director general of the FMB

“The combination of raising the rate of CGT and VAT may limit growth and cost jobs in the sector. RICS had warned that a significant rise in CGT would threaten the supply of development land and deter new investors from entering the private rented sector. This risk will be tempered by the lower than expected increase.   

“We expect that the reduction in corporation tax rates over the next four years.”

Mark Goodwin, RICS director of external affairs

“It will come as some considerable relief to many entrepreneurs holding assets with latent capital gains that the rate was not increased in more in line with employment income, as had been widely reported in the press. An increase to 28% is significant but it could have been far worse. Fear that the rate would be increased to 40% or even 50% has seen a number of wealthy taxpayers hastily implementing planning to capture the benefit of the 18% rate.

David Brookes, Tax Partner, BDO LLP

“The tax and VAT hike announced today will add to the distress of an already fragile recovery in the construction sector. As consumer now face an increase to their tax bill and a rise in VAT, this will undoubtedly lead to a fall in the confidence they need to make larger scale purchases.

Phil Westerman, head of construction at Grant Thornton

Growth forcasts

“The other issue of note is that with strong GDP growth forecasts for 2011 and 2012 - the inference is that the Bank of England will be encouraged to maintain a very loose monetary policy for longer than recently expected, suggesting interest rates at current levels could be maintained for longer.

“This would underpin house prices and also contribute to ongoing low supply in the market.”

Liam Bailey, head of residential research, Knight Frank