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2020 spending review: Industry response

26 Nov 20 Numerous construction industry figures have come forward with their views on what the chancellor’s 2020 spending review and the National Infrastructure Strategy, published side by side yesterday.

How is Rishi Sunak's medicine going down with the construction industry?
How is Rishi Sunak's medicine going down with the construction industry?

For more detail in what the chancellor of the exchequer said yesterday, see our other pages. Here is what people who work in the construction industry thought of it.

Civil Engineering Contractors Association (CECA) chief executive Alasdair Reisner

“The vision set out by the chancellor today is one in which investment in infrastructure is a key priority for delivering growth and creating jobs across all parts of the country. The creation of a National Infrastructure Bank, to be based in the north of England, will enable the strategic investment businesses and communities require.

“We are particularly pleased to see the creation of a specific ‘Levelling Up’ fund, which will enable local communities to bid for projects based on their own expertise and needs.

“The government’s planned £100bn of capital spending next year will ensure the UK’s economic recovery from the historic impact of Covid-19 will be as swift as possible, creating jobs and growth, to the benefit of businesses and communities in all parts of the UK.”

Institution of Civil Engineers director general Nick Baveystock

“Today’s announcements could genuinely be a game-changer in delivering an infrastructure system that works better for the public. An infrastructure strategy gives clarity on the direction of travel for investment, and an infrastructure bank will help lower the cost of greener technologies and projects needed to ramp up decarbonisation. The Green Book now lives up to its name, with a bright green thread running through it to better weigh environmental costs and benefits alongside social and economic needs.  

“Expected consultations on financing a net-zero transition and exploring the options for greening our electricity will be an essential start. However, this is an integrated challenge. We need joined-up plans to achieve real change, for example to ensure polluting forms of transport get phased out as greener sources of electricity come online, alongside the introduction of measures to replace the evaporation of fuel duty receipts. Connecting these dots is an area policymakers should now focus their effort and attention.”

Turner & Townsend UK managing director Patricia Moore

“The message from government today is that infrastructure is to take a central role in narrowing the north-south divide.  However, investment must be made in the right way if we are to successfully build back better from Covid-19.

“The National Infrastructure Strategy focuses on connectivity – we now need central and devolved governments to align this plan with improved social and economic infrastructure too.

“The aim should be to ‘level up’ by ‘linking up’ – connecting communities in a way that supports jobs.  In many regions there is not enough joined-up planning across highways, rail, energy and residential development.  Recognising housing as a key part of our national infrastructure is paramount to achieving more balanced economic growth.

“Government has placed its faith in infrastructure, but the industry is fragile.  Investment needs to be made in a way that delivers economic, social and environmental value for communities, at the same time as building capacity and skills capability within the sector itself.”

Federation of Master Builders chief executive Brian Berry

“Local builders stand ready to support a strong and green economic recovery, but the statement from the chancellor today fell far short. We look to the National Infrastructure Strategy for more detail, but no mention in the chancellor’s speech of low carbon homes or green jobs is unacceptable given the challenges we face. Confirmation of investment in further education and skills is welcome, as is the announcement of the National Infrastructure Bank. It’s important that local builders have access to both, if they are to provide the jobs, homes and growth the country needs coming out of the pandemic.”

On Net Zero, Mr Berry said: “We cannot meet our Net Zero carbon targets without improving the energy efficiency of our homes and moving to low carbon heat sources. Failure in this Spending Review to commit to a long-term retrofit strategy or to bring forward the £9.2bn promised in the Conservative manifesto will set the country back. Acknowledgement of the need to retrofit is one thing; but a plan must follow.”

On apprenticeships and training: “SMEs train 71% of apprentices in construction and are ready to help support new jobs in the sector. While the confirmation of funding for further education, £375m through the life time skills guarantee, and a particular reference to apprenticeship changes to help SMEs are all steps in the right direction, colleges will need more support if we are to cover the existing gaps in traditional construction skills like bricklaying, let alone train people in much needed green construction techniques.”

On house-building: “This year more than ever we have all appreciated how important it is to have a decent place to live. SME house builders stand ready to deliver more sustainable and beautiful homes, in each community and on small brownfield sites. I welcome the extra support from the chancellor with the announcement of the National Home Building Fund and confirmation of Help to Build. Extra funding is welcome, but without urgent investment in our local authority planning departments to speed up decisions, projects are struggling to get off the ground."

Builders Merchants Federation chief executive John Newcomb

“The chancellor was clear that the health emergency is not yet over and the economic emergency has only just begun.  We must be prepared for a challenging year ahead, but there was some welcome news within his statement. 

“In particular, we welcome the £20bn committed to underpin the government’s long term housing strategy, confirmation of capital investment to deliver the government’s commitments on building 40 hospitals and rebuilding 500 schools over the next decade,

and the multi-year funding required to deliver the prime minister's ten point plan for a geen industrial revolution.  The latter includes a welcome 12-month extension for the Green Homes Grant, announced last week.

“However, we would have liked to hear the chancellor go further and announce funding for a national retrofit strategy to turbocharge the levelling-up of housing conditions throughout the country.   Pump-priming this work would undoubtedly improve lives, create jobs, boost the economy as well as making greater inroads towards the government’s target of net zero emissions by 2050.”

Asphalt Industry Alliance chair Rick Green

“Our local roads played a vital role in keeping the country functioning this year, supporting the emergency services and facilitating the distribution of food and goods, and today’s funding announcements reflect that the government recognises the need to invest in the local road network as we build back better.

“While these spending commitments are welcome in these challenging times, we are aware that the sums outlined will not be enough to plug the existing multi-billion pound backlog in road maintenance funding and so our ageing network will continue to decline. 

“What’s needed going forward is an additional investment of £1.5bn a year for 10 years, to improve the experience of all road users, support recovery and deliver a much-needed boost to the economy.” 

MHA MacIntyre Hudson indirect tax director John Rossiter

“On infrastructure spending, the spending review struck a good balance between large long-term infrastructure projects and funding for smaller regional ‘shovel-ready’ projects.  Combined with the commitments made to upskill workers and create jobs, this should provide the foundations to help support the medium-term recovery from the Covid-19 crisis and longer-term ambitions. However, it’s vital that funding is made available quickly and efficiently, and that projects needing funding are identified and agreed in a timely fashion. Speed is of the essence if jobs in the construction sector are to be protected in the short term and increased in the longer term to meet infrastructure demand.

“The establishment of a National Infrastructure Bank allowing private investment is a very positive development announcement, and will help funding get to where it needs to be deployed. However, there absolutely needs to be regional capability to deliver projects. Not just local authorities or private business, but other stakeholders such as the local community, campaigners and advisers have got to be engaged. This model has been proven to work – and work effectively.”

Confederation of British Industry (CBI) chief economist Rain Newton-Smith

"Stark forecasts point to tough times ahead. But through his statement, the chancellor has made some bold autumn decisions to power a spring recovery.

“The spending review lays the foundations for a brighter economic future. A new National Infrastructure Bank, long-term funding for innovation, and a comprehensive plan for creating jobs and renewing skills are just some of the building blocks needed to deliver on this vision. It’s right to take this opportunity to plan for tomorrow.

“But ambition must be matched by action on the ground. The government’s commitment to build, build, build must be delivered now. This means a clear strategy to upgrade the UK’s infrastructure and publishing the energy white paper.

“And there can be no let-up in the support for firms facing new Covid restrictions. Firms need help to survive, then thrive. Business investment and confidence can be the engine of UK growth, creating jobs around the UK.”

On infrastructure: “We know just how vital refreshing our ageing infrastructure is to repower the economy, connect more people and create job opportunities across the UK. Putting money into roads, broadband and clean energy will help do just that.

“Most importantly of all, the government has set out its stall for the long-term by creating a National Infrastructure Bank. With the right remit, the bank has the potential, to crowd in the private finance that will be crucial to delivering these new projects.”

Association for Consultancy & Engineering (ACE) chief executive Hannah Vickers

“Our industry will be broadly happy with today’s announcements. Despite much of it being previewed over the last week, we still had the surprise of a £7.1bn National Home Building Fund, which will be warmly received.

“There were important strategic moves too. The intra-city transport settlement will give local bodies more control over transport decisions and their own budgets, but we still would have liked to have seen more progress on Northern Powerhouse Rail – a missed opportunity for a clear and demonstrable commitment to levelling-up.

“Much will be made of the changes to the Green Book, which are probably more a symbolic gesture for a shift in culture, than anything else. Equally, the creation of a UK Infrastructure Bank will be welcomed, but I wonder whether the Chancellor is asking the wrong question – we already have access to finance, what we are lacking is the appetite from Government to deploy it and investible opportunities – so I’m unsure what problem exactly the Bank will be solving?

“We were also pleased to see the principles of the Construction Leadership Council’s proposals for a new local infrastructure fund to accelerate growth and recovery adopted. The £4bn Levelling-Up fund can potentially be a catalyst for locally-led regeneration, but we hope to see its scope expanded and capability deployed ahead of the UK Infrastructure Bank. This will ensure we maximise its potential impact on recovery, rather than focus on individual tactical project investments.

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“However, the chancellor laid bare the difficult financial state we are in as a country and I worry whether we are being distracted slightly from what’s important. I’d like to see all energies focused on delivering a strong pipeline of projects across the country, so our industry can kickstart growth, act as the catalyst for post-pandemic recovery, and meet ambitions on levelling-up.”

Michael Watson, partner at law firm Pinsent Masons

"The National Infrastructure Bank has the opportunity to make significant strides towards the government's levelling up agenda but it cannot simply be treated as a replacement for the European Investment Bank. The financing and funding of new technology at scale needs to be its number one priority to kick-start the UK economy and take proactive steps towards net zero goals.

The bank could at least, in part, effectively act as a large scale venture capital fund - at a pivotal time when the infrastructure and energy sectors are at an inflexion point and intervention is needed to accelerate change and galvanize new technologies."

Liz Jenkins, partner at law firm Clyde & Co

"We have been waiting since July 2018 for the government's response to the National Infrastructure Commission's assessment of the UK's long-term economic infrastructure needs. Today's announcement should give the construction industry a project pipeline on which to plan for the future and also provide some certainty as we embark on a post-Brexit and post-Covid world.

"While investment in transport infrastructure is to welcomed – especially measures to smooth the transition to electric vehicles – it is clear that Covid-19 has transformed the way we all use this infrastructure. In lockdown road and rail usage faced a steep decline, and we await the detail to find out if the bigger picture of this 'new normal' played into Sunak's thinking.  

"The industry's eyes will be on the details underpinning the National Infrastructure Bank and in particular the extent of the interplay between the public and private sectors in funding the new projects, as identified previously in the National Infrastructure Commission's assessment. It will also be interesting to see how this figures in the revamped Green Book, which has been accused of London-centric bias in the past. Either way, we will need unprecedented rapid progress in projects to meet the climate deadlines coming up fast."

UK Green Building Council director of policy and place John Alker

“We welcome references to net zero in the National Infrastructure Strategy, which suggests the climate emergency is finally gaining traction in HMT. In particular, it is encouraging to see projects intended to deliver net zero reflected so prominently in the remit of the new UK Infrastructure Bank.

“However, we are disappointed to see that, despite widespread consensus, energy efficiency is not included as a national infrastructure priority, and that the only references to it in the National Infrastructure Strategy involve unlocking private investment. Greater public investment in energy efficiency, beyond the small sums confirmed on social housing and public buildings, will be needed in order to leverage substantial private investment; and this must be accompanied by a longer-term strategy to deliver certainty beyond the Green Homes Grant. The ‘Levelling-up’ Fund should be used to support this, through enabling local authorities to drive further action on energy efficiency at a local level. 

“Overall, there is clearly more to be done to ensure delivering a green recovery serves as the guiding light for all major investment and planning decisions. We look forward to further action to entrench net zero comprehensively into infrastructure spending and the planning system, notably in the Treasury’s Net Zero Review and other forthcoming strategies.”

Transport for the North chief executive Barry White

On the Green Book review: “The government’s review concludes what we have long said - that the way investment decisions are made needs to change. Not only were the previous rules outdated and overly reliant on a formulaic cost-return calculation, but they would actively undermine the ambition to ‘level up’ poorer regions.

“The Green Book update could bring a fundamental change to the level of investment in the north. Focusing more on benefits to communities; how projects underpin key objectives like levelling up or decarbonisation; and how schemes can bring transformational change, is all extremely helpful. It means that decisions can be taken based more on the wider benefits that they’ll deliver for a town, city or region, breaking the cycle of investment decisions automatically favouring the most prosperous areas of the UK such as London and the southeast.”

Arcadis head of strategic research and insight Simon Rawlinson (who serves on the government’s Construction Leadership Council)

“This is a great settlement, particularly given the pandemic has already cost the government £280bn in emergency measures this year alone. Today, we heard an expansive review committed to jobs and to investing in the future of our country. With increases in funding for priority departments, decarbonisation initiatives and long-term funding settlements for infrastructure, this was a real statement of confidence in our industry, motivated by a belief in creating jobs and driving growth across the country through investment.

“Crucially though, this is not investment for its own sake. We need to recognise the scale of the task in hand, and that recovery depends on our sector’s ability to deliver the road, rail, housing, health and education programmes on which the nation depends. With the UK facing the highest level of unemployment since the early 1990s, addressing the skills gap and ensuring we have the right talent and resource will be vital. In granting sustainable, long-term funding to rebuild the economy, the government is committed to the levelling-up agenda and investing in the future, but it will be up to communities, businesses and individual citizens to ensure that these positive measures now translate into concrete results.”

Royal Town Planning Institute (RTPI) chief executive Victoria Hills

“While we understand the impact the pandemic has had on the country’s public finances, the government will not be able to achieve its ambitions to radically overhaul the planning system without adequate investment in local authorities.

“While we welcome the £4bn Levelling Up fund and the £7.1bn National Homebuilding fund, we are concerned that local democracy is once again being disenfranchised. Encouraging a bidding culture impacts on the ability for long term planning, creates winners and losers and requires resourcing to apply for.

“In our white paper response we called for the introduction of Green Growth Boards to deliver joined-up strategies for climate action, infrastructure, housing provision, health and nature recovery on a regional level.”

“Local authority planning departments have seen a 42% reduction in funding over the past decade which has had implications not just for efficiency or process. The £12m announced by the chancellor today is woefully inadequate and fails to recognise the vital role the UK planning system plays in the economic recovery post-Covid.”

In its formal response to the comprehensive spending review (CSR), the Institute set out the vital role planning plays in facilitating economic growth, providing affordable housing, tackling climate change, ensuring access to green space and improving wellbeing. It called for £500m over the next four years to enable planning departments to delivery outcomes efficiently, effectively and equitably.

Victoria Hills welcomed the publication of the National Infrastructure Strategy but again called for spending on national infrastructure to be firmly linked into local infrastructure and housing.

“National infrastructure objectives require a place based approach to exploit synergies between sectors including energy, transport and digital, flood defences and green infrastructure, and to coordinate delivery for maximum efficiency. This is a role for planning in the broadest sense.

“Furthermore, city-regions need a robust understanding of their infrastructure need to enable the proposed National Infrastructure Bank to channel public/private sector investment to support delivery.” 

National Federation of Roofing Contractors chief executive James Talman

“It is very welcome that a further £320m of funding has been committed to the Green Homes Grant for the next year, but the government has missed a trick by not extending this to have a broader scope. We do not see why the scheme could not be extended to include solar PV, for example, which could play a big contribution in helping the UK reach its net-zero target.

“We were also pleased to see the National Infrastructure Strategy announced, committing to £27bn more capital spending over the next year, alongside a new National Infrastructure Bank. The government should follow this strategy up as soon as possible with a detailed pipeline of work, and engage with the supply chain in good time.

“The Treasury is giving with one hand to the industry and taking with the other—by going ahead with reverse charge VAT next March. We have members who will lose hundreds of thousands of pounds in cash flow when this policy is introduced, and this will have a detrimental impact on the very companies the government expect to deliver on their infrastructure investments. The chancellor should urgently rethink this policy.”

Gleeds Worldwide chief executive Graham Harle

“Against a backdrop of truly horrifying economic news, the chancellor has wisely decided not to follow the flawed wisdom of his predecessors and hike taxes. Instead, I welcome this government’s decision to invest in the country’s public sector building programme covering housing, roads, rail, education, and health. Borrowing costs are at record lows whilst, as the chancellor has shown, the number of unemployed will be at a record high. Our sector is one of the UK’s biggest employers, so while the cost of borrowing is so low now is the time to invest in the built environment and green economy which will create jobs and makes sound economic sense.”

 Tarmac Contracting managing director Paul Fleetham

 “2020 has brought one of the most challenging periods society has faced in decades, however as light begins to emerge at the end of the tunnel the importance of having a first-class, well-maintained local road network to support the economic recovery should not be taken lightly.

“There is much to be welcomed in the chancellor’s Spending Review, including the £4bn Levelling Up Fund to support local infrastructure, a new National Infrastructure Strategy and of course a much needed £1.7bon towards maintaining and upgrading our local roads that have suffered from years of under-investment.

“However, it’s critical that these pledges are met with longer-term commitments and sustained periods of ring-fenced investment, as most of all local councils need certainty to plan and implement essential maintenance programmes. Only a complete asset management approach to our highways will deliver the improvements that are needed and ensure that the local road network is no longer treated as a second-class asset.”

UK Steel director general Gareth Stace

“Today’s Spending Review announcement is to be cautiously welcomed, addressing as it does key high-level priorities of jobs, infrastructure, and innovation, but further steps are required. With Covid-19 still causing unprecedented damage to the UK economy, manufacturing, and steel demand, it is vital that the key measures set out today to aid recovery are translated in detailed, practical action on the ground, and are built upon in next year’s fiscal events."

On infrastructure: “Most importantly, today’s long-awaited National Infrastructure Strategy, and the promise of £100bn spending next year, must be rolled out in a manner that ensures these projects maximise support for jobs and economic growth in the UK. Elsewhere in this review, the chancellor has made it abundantly clear the urgent need to help people back into work through the Plan of Jobs and the Restart Scheme. However, the government must also recognise and unleash the full potential of infrastructure projects to support British industry and its workers. The huge levels of promised infrastructure spending must now deliver the largest possible return for taxpayers’ money by maximising the UK content of these major projects, including UK-made steel. We call upon the government to urgently work with the steel industry now to make this a reality, building UK infrastructure from UK steel."

On energy and climate change: “Elsewhere, promised spending on decarbonisation has the potential to help the steel sector on its road to net-zero, but worryingly there is again no detail on measures to provide cost-competitive electricity prices for the sector that will fundamentally underpin this transition. Critically, the funding for carbon price compensation comes to an end this year, and without renewed funding, the sector will face additional costs of over £30m. Steel producers already face higher electricity prices, where their costs are almost £50m higher every year than their German counterparts. It is critical that the government immediately confirms a budget for this essential scheme next year."

On innovation: “We welcome the chancellor’s announcement on a £15bn investment in R&D next year. The future of the steel sector rests heavily on continued innovation of our products and processes, and today’s announcement has the potential to help us do just that. It is critical that the government now moves swiftly to create a UK Research Fund for Steel – filling the gap left by our exit from the European scheme at the end of the year. Crucially, the money required to do this is already there, with £200m in industrial levies paid by UK steel companies set to be returned to the UK by the EU next year."

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