Construction industry leaders react to the announcements in the Chancellor’s Budget today
The construction industry has reacted to the announcements in the Chancellor George Osborne’s emergency budget today.
In the first Conservative budget since 1996, Osborne’s headline announcement was the unexpected introduction of a new national living wage of £9 an hour by 2020.
The Chancellor confirmed his commitment to spending on the country’s roads with a new “roads fund”, with tax paid on cars reinvested into road improvement works.
Osborne also voiced his concern about how social housing rents have risen over the last five years, and said social housing rents will be reduced by 1% per year over the next four years.
The climate change levy exemption for energy generation will be removed, the Chancellor said.
Osborne also reaffirmed his commitment to provide three million more apprenticeships by 2020 as he announced an apprenticeship levy on all large firms. However, it’s not clear whether this is in addition to the levies large construction firms already pay.
Eddie Tuttle, senior policy and public affairs manager at the Chartered Institute of Building, said: “The introduction of a new apprenticeship levy is a big ask for business, but one that recognises the acute skills shortages industries such as construction will face in the future unless significant investment is made in training. And if the government is to deliver on its ambitions, more needs to be done to promote construction as a viable career path.”
Nicola Hodkinson, director of business services at Seddon, said: “It is time for the larger contractors to step up to the plate and provide apprenticeships, rather than relying on smaller subcontractors to bear the burden of funding and delivering vital training.
“We welcome the steps outlined in George Osborne’s Budget to ensure that companies are encouraged and remunerated to take on apprentices.
“There is no shortage of will from young people, however there is a shortage of employers willing to give them the chance - many of whom cite the financial burden. For Seddon, apprentices will never be a burden, financial or otherwise.”
John Hicks, director and head of government and public sector at Aecom, said: “As an employer of apprentices we applaud the decision to impose an apprenticeship levy on British business. This move triggers a change from an environment of governmental encouragement to one of greater employer control and delivery, enabling companies to train more young people for the workplace. This helps the economy and the UK’s ability to compete on the global stage.”
David Orr, chief executive of the National Housing Federation, said: “Housing associations share the Government’s vision of homes as a foundation for getting on in life. Like this Government, we want to see more homes built, more people working and more families with a home of their own. And like this Government we want to help people off the merry-go-round of benefits, ensure that hard work pays and reduce the benefit bill.
“Given changes to working age benefits, a cut in rents over the next four years will be a real help for some tenants, but will massively constrain housing associations’ ability to meet the shared ambition of themselves and government to drive housing growth and new jobs.
“At the very least 27,000 new homes will not now be built, though that figure could be much higher. The right to buy for housing association tenants further compounds this.”
Brian Berry, chief executive of the Federation of Master Builders, said: “The construction industry is at a loss as to why the Government is ignoring the need to improve our current housing stock. By refusing to acknowledge the importance of these improvements, the Government is exacerbating problems such as high household fuel bills, carbon emissions and the national housing shortage.
“Climate change is an issue that concerns the majority of the population, but without tackling the energy inefficiency of our housing stock, the Government is not taking cutting carbon emissions seriously. This is rather surprising when you consider that not long ago; the Prime Minister wanted his Conservative-led Coalition to be the ‘greenest Government ever.’
“Making our existing homes a national infrastructure priority, re-directing carbon taxes, putting an energy efficiency financing framework in place and reducing VAT on housing renovation and repair work from 20% to 5% are all effective and implementable measures. We urge the Government to wise up on energy efficiency - we want to work with Ministers to find a sustainable solution.”
Terrie Alafat, chief executive of the Chartered Institute of Housing, said: “We support the government’s ambition of building more homes and helping people realise their aspirations of home ownership and work - but not at any price.
“Action to restrict entitlement to benefits is at best a stop gap measure and at worst increases poverty and misery for already poor and vulnerable people. Long-term, effective action would focus on increasing our housing supply not further restricting access to our already insufficient and inadequate supply of homes.
“Cutting housing benefit simply penalises people who are struggling to afford a place to live, rather than tackling the root cause of the problem. Freezing working age benefits for four years fails to reflect the reality of the housing crisis - we have failed to build the number of homes we need for decades, which means the cost of housing and therefore the housing benefit bill is going up.
“We know the government wants to tackle this issue, and housing professionals across the UK are ready to work with them on the solutions that could make a real difference. But we’re concerned that some of the measures announced today are going to make it more difficult for them to play their part in building the new homes we need and supporting people into work or training.
Steve Sanham, development director at HUB, said: “This is another budget stoking demand in an already bloated housing market. Encouraging people into further debt in order to buy overpriced homes, even after a ‘discount’, cannot be the answer to the housing crisis.
“Ultimately, buyers want to buy in the open market at a sensible price - not in some artificially suppressed and relatively small ‘submarket’. Deregulating the planning system, releasing public land at sensible prices for housing development, and being flexible about the types of and deliverers of affordable housing should be the priorities if we want to create a balanced and resilient housing market.”
Dr Anthony Lee, Senior Director at BNP Paribas Real Estate, said: “The government’s plans to reduce rents paid by tenants will have an adverse impact on both housing associations and developers.
“Social housing rents have - until now - increased annually by RPI plus 0.5% per annum, underpinning housing associations’ business plans and making social housing an attractive investment proposition. This announcement is likely to undermine housing association finances and risks making bond issues less attractive.
“There is also likely to be an adverse impact on the viability of new developments. The rent reduction will reduce the amount housing associations can pay developers for the affordable housing element in their schemes. This will put pressure on viability and ultimately reduce the overall percentage that schemes can provide.”
Iain Mcllwee, chief executive of the British Woodworking Federation, said: “Like others, we have serious concerns about the future security of income for housing associations and their likely ability to maintain their development or refurbishment programmes. Affordable housing is already on its knees. Planning reforms to be announced on Friday will need to reduce development costs significantly to give us any chance of a sustainable social housing sector in the future.
“And looking at the direct impact on SMEs in the construction supply chain, while an increase in the minimum wage for the lowest paid is welcome, we cannot ignore the fact that such increases have a knock-on effect throughout a business, creating inflation in a firm’s total wage bill.”
Richard Steer, chairman of Gleeds Worldwide, said: “The last budget by a Conservative government was 1996 - it promised a cut in income tax, raising of inheritance tax threshold and enhanced spending on housing. It’s 2015 and this is the ‘back to the future’ budget with Osborne picking up where Ken Clarke left off.
“There are some things to welcome like the new road fund, plans for devolvement of planning and enterprise zones to pass to local control and a cut in corporation tax but also many opportunities lost. Where is the green agenda, a credible - new home building programme, and HS3? There will also be some discussion that the cut in social housing rents may hit future development plans. The new apprentice levy for large firms is also unspecific. Will construction firms who already pay through the CITB be excluded, or pay twice? Welfare cuts will dominate the headlines but Construction needs to look at the small print.”
Mark Naysmith, UK chief operating officer and managing director for transportation, infrastructure and property at WSP | Parsons Brinckerhoff, said:
“This has been a mixed bag for the construction industry. The start of a new Parliament is a significant opportunity for the Government to present an ambitious programme to take the UK forward.
“On the one hand we welcome the priority that has been given to essential infrastructure funding and apprenticeships. It’s great to see more attention for tackling the skills shortage, so that industry and the supply chain have the capacity to deliver on projects.
“On the other hand we still lack a coherent vision for how we are going to build our way out of a housing crisis. The stakes are high. The nation’s need for new housing and infrastructure remains urgent and we should already be looking beyond where Crossrail 2 and HS3 might go, and how this will drive associated developments.”
Civil Engineering Contractors Association chief executive, Alasdair Reisner, said:
“The Chancellor has today rightly focussed on how the UK can improve the productivity of UK businesses as a means to safeguard and build a stronger economy.
“We recognise that action needs to be taken to develop a long-term strategy for productivity improvement, developing a workforce with the advanced skills needed by the industries of the 21st century. This should be run alongside a move to an innovation-led economy that finds new, more efficient ways to deliver goods and services.
“However this will take time. The most direct way for the Chancellor to harness improved productivity is through the continuing investment in the country’s transport networks. CECA’s research shows that, since 2000, the global economies that invested most in their transport networks are those that have seen the biggest productivity gains.
“We call for the Chancellor to continue his focus on transport investment, helping the UK to show the way to the rest of the world to drive up productivity.”
Melanie Leech, chief executive of the British Property Federation, commented: “The way we shop has changed beyond all recognition in recent years and Government has struck the right balance between being alive to that and ensuring any further liberalisation of shopping hours is well managed.
“Longer hours will not suit all places, but equally should not hold other places back. Devolving the decision to a local level and those who know what will be best for their area, in this instance, therefore makes perfect sense.”
On the National Roads Fund, CECA chief executive Alasdair Reisner said: “This is extremely good news for our sector because it goes a long way in ensuring a secure future for the maintenance and upgrade of the English strategic road network.
“In CECA’s 2014 publication The Infrastructure Decade we called for Government action to address the long term funding of our roads.
“Building on the completion of the roads reform process last year, long-term funding reform of the roads network is key to delivering infrastructure that is fit for the 21st century.”
Jason Millett, chief operating officer for major programmes and infrastructure at Mace, said: “I welcome the Chancellor’s decisions to increase Transport for the North’s funding and place the body on a stronger, statutory footing, as well as giving additional powers to Greater Manchester.
“This promises to be a good thing for regional road and rail infrastructure, helping to redress the balance of investment between the North and South.”
James Stamp, head of transport at KPMG UK, said: “In the last budget, the Government announced a major road investment program worth £15billion. Today, the Chancellor announced that road tax (VED) income will be “ring fenced”. This provides some clarity about where funding for the ambitious road projects will be found.
“However, we note that while road tax raises around £6 billion per year, this is dwarfed by income collected from fuel duty which is around £27 billion. We believe that more of this income should be reinvested in roads and transport infrastructure in line with the Chancellor’s statement that money raised from drivers should be spent on the roads they drive on.”
John Alker, Director of Policy and Communications at the UK Green Building Council, said:
“George Osborne promised a Budget that would be bold in delivering infrastructure. Yet energy efficiency, which should be seen as one of the UK’s biggest infrastructure priorities, failed to even get a look in.
“Energy efficiency is an economic no brainer - cutting bills for households, creating jobs and growth, and improving our energy security. Government’s failure to support this industry at a time when uncertainty about the future of ECO and Green Deal is rife, represents a major missed opportunity for the economy.
“We welcome the review of the landscape for business energy efficiency - however, this must be about smarter regulation, rather than an ideological slashing of perceived red tape.”
Jon Hart, infrastructure partner at law firm Pinsent Masons, said:
“As in previous years, we are going to have to wait until the Autumn Statement to see how precisely the further cuts are going to be applied to the big spending departments like the Department for Transport, but today’s budget has continued the uncertainty around opportunities for the nation’s roads, airports or railways for investors and the wider business community.
“It is disappointing that the only reference to Heathrow, for example, was an (admittedly witty) jibe by the Chancellor at the expense of the Hon. Member for Uxbridge.
“No express reference was made to rail investment, despite the recent project cancellations - although reference to providing a statutory footing and £30m for the Transport for the North is to be welcomed - but only as a means to an end in improving transport connectivity.
“No talk of Network Rail, mired in review by the regulator and silence on HS2 and Crossrail 2 either indicate that perhaps rail investment is going to be subject to further examination before the Autumn spending announcements.”
John Hicks, director and head of government and public sector at Aecom, said: “There were promises to be bold in delivering infrastructure, yet there was little detail about how the government aims to speed up delivery of major projects that will boost jobs and crank up the economy.
“We welcome the move to direct revenues from the new Roads Fund directly into rebuilding Britain’s highways. Coupled with delivery vehicles such as Highways England, this could prove interesting. However, timing remains an issue as revenue will not be generated from this initiative till 2017 or after. The longer-term nature of infrastructure therefore leaves the question of interim funding currently unanswered.
“The initiative to put the Land Commission in the hands of city mayors is welcome and the commitment to devolve more decision-making power to help build the Northern Powerhouse is also promising. There was however little mention of capital projects. We urge that mechanisms such as the National Infrastructure Plan are further developed to allow cities and regions to exploit the economic benefit of this policy.