What does Budget 2017 mean for Construction?

The Chancellor’s 2017 budget was pretty much what was expected at this time, fiscally conservative with a focus on house building . 

Further investment of £15.3 billion to facilitate the building of 300,000 new homes over the next five years, bringing the allocated budget to £44 billion is a good start. This figure includes £2.7 billion for infrastructure to support the housing. A particular focus on increasing development in urban areas will be a welcome addition to many, providing easier access to jobs and helping to boost productivity. The proposed planning reforms to ensure that underused land in cities and towns should also help to facilitate this. While a review of land use, and the amount with agreed planning permissions being held back by firms, could help with ensuring that space is suitably allocated there are fundamental technical issues which need to be addressed. The cost of removing contaminated waste, a particular issue in previously developed urban areas, is prohibitively expensive for some firms. A specified investment outside of the £630 million allocated for small sites infrastructure and remediation, and the £1.5 million Home Building Fund would help reduce the burden on developers. Coupled with an increase in disposal sites, this could potentially help to ensure that more firms are able to develop existing sites. 

The proposal to develop five new garden towns will help secure necessary investment into the sector; however, with the main focus of this being in the South East, where the housing shortage is most acute, the government must ensure that it doesn’t divert currently limited resources away from other parts of the country where there is also a need. With this in mind it would have been good to have seen more direct focus on addressing materials shortages as a whole. Long lead times on essential supplies, such as bricks, may prove more damaging to the government’s plans than anything else at this stage. The proposed £170 million into innovation in the construction sector may go some way to help with this, depending on its end use allocation, however, addressing immediate needs, through increased support for importing supplies where necessary for example, must also be a priority to address this. 

The big takeaway from the budget was a welcome investment in implementing T levels. First and foremost these need to be developed as a genuine alternative to A Levels, to ensure that they are respected not only by employers within the industry but also by prospective candidates, and their parents, otherwise they could end up being a boondoggle on public finances without achieving their desired aims. With 22% of construction industry workers over 50, and 15% in their 60’s, the industry is running out of time to tackle the skills shortages, so delays in implementation and uptake for T Levels, and apprenticeships, must be kept as short as possible. Working with the industry on how to ensure that the apprenticeship levy is spent is another good sign, although with only 1% of employers looking to take on apprenticeships this must again be dealt with quickly, and more investment made in encouraging employers to take on apprentices and inexperienced staff. 

Where the industry may find itself exposed by the budget is in changes to National Insurance Contributions. Actions such as the loss of tax relief on dividend payments could prove hard to bear, particularly in an industry where approximately 40% of the workforce in classed as self-employed. With the industry currently needing to employ about 33,000 people per year to meet the labour requirements, and T skills and apprenticeships being only medium to long term solutions, there is a risk that if the government makes being self-employed in the industry harder than we could face an exodus of much needed existing skilled trades from the wider sector. 

Overall the budget hasn’t provided any dramatically contentious points. It was what was expected at this time, a safe budget with the right moves towards increasing productivity. A focus on the South East is understandable in this regard, however, it is essential that the government doesn’t push forward with this at the expense of areas such as the South West, North East, Midlands and Wales where construction sector employment needs additional support. £500 million investment in T Skills will be the main bonus for the industry, however, the reality is that it will take time to train up new skilled workers, and therefore there could be more focus on encouraging those who left the industry during the financial crisis to return and easing the burden on self-employed workers..