A key headline of the 2021 autumn budget is the promise of “the largest real-terms increase in overall departmental spending for any parliament this century”.
Total spending by government departments will grow by £150bn a year in cash terms by March 2025, a £90bn real-terms increase.
Latest figures indicate that that the economy is on track to reach pre-pandemic levels by early next year, with unemployment peaking at less than half what was initially predicted.
Growth this year is revised up from 4% to 6.5%. The Office for Budget Responsibility then expects the economy to grow by 6% in 2022, and 2.1%, 1.3% and 1.6% over the next three years.
The spending review confirms an allocation of £24bn to National Highways for the years 2020-21 and 2024-25 for England’s strategic roads; English local highway authorities share £5bn over the same period for routine maintenance plus £2.6bn towards a long-term pipeline of more than 50 local road upgrades.
An additional £1.8bn is being allocated to housing supply, on top of the £10bn already earmarked for the five-year period. This includes £300m of locally-led grant funding that will be distributed to local authorities and mayors to unlock smaller brownfield sites for housing, and £1.5bn to regenerate underused land and build infrastructure to unlock 160,000 homes in total.
While there was no wholesale reform of business rates, a new investment relief is being introduced to encourage businesses to adopt green technologies like solar panels and a new ‘business rates improvement relief’ will allow businesses to make property improvements and pay no extra business rates in the first year.
Industry reaction
The reaction from the construction industry was broadly positive, as it usually is when it is told it is going to get lots of taxpayers’ money. Some, however, would have liked rather more – either more detail or more money.
Here is a selection of comments received.
“We welcome the chancellor’s budget and, as a business with a significant national footprint, we are particularly buoyed by the government’s continued focus on levelling up, including a 20% increase in funding for new affordable homes and the 100 local infrastructure projects that will benefit from the levelling up fund. The construction industry stands ready…” Stephen Beechey, group public sector director, Wates Group
“It is great to see the government putting its money where its policy is and enabling us as a sector to support Britain building back better.” – Andy Reynolds, chief executive, Rider Levett Bucknall
“The £1.8bn pledged towards brownfield housing developments is closest to our hearts as engineers and will make a real impact in making the UK more sustainable, as it’ll not only stop us from using greenfield sites, but also help us clean up brownfield land.” – Sean Keyes, managing director, John Sutcliffe Associates
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“Kier welcomes the chancellor’s continued commitment to provide investment in future projects across a number of government departments. As the country emerges from a challenging period in its Covid-19 recovery, these investments will provide much-needed upgrades to social infrastructure, transport facilities and local communities across the UK, positively impacting those that need it the most. As well as boosting productivity and positive economic outcomes, today’s announcements also present real opportunities for the construction and infrastructure sector to create new jobs and training opportunities and to enhance sustainability across the built environment.” – Andrew Davies, chief executive, Kier
“We are delighted that the chancellor has listened to our calls to exempt plant and machinery used in onsite renewable energy generation and storage from business rates. The business rates system currently discourages investment in commercial rooftop solar PV, taking up 40% of any potential cost savings. Commercial rooftop solar has huge potential… We also welcome the chancellor’s business rates improvement relief, which will allow businesses to make property improvements and pay no extra relief for 12 months, and we look forward to seeing further details on what measures this will cover. We would also urge the Treasury to monitor the implementation of these business rate changes carefully to ensure that there isn’t a stagnation in investment whilst building owners wait until 2023.” – James Talman, chief executive, National Federation of Roofing Contractors
“Today’s spending commitment to improve regional transport networks and roads is a significant opportunity to create new sustainable infrastructure. Globally, cities account for 60% of global carbon emissions and 78% of energy use, but the UK can now set an example of the alternative. If we use data to plan how this funding is used, we will design transport systems that encourage individuals to take public transport, use electric vehicles, walk and cycle more. Being ambitious in how we use this funding, we can create healthier places to live as well as contributing to the global reduction in emissions.” – Donald Morrison, senior vice president, Jacobs
“The chancellor’s commitment to invest £1.8bn in brownfield urban land regeneration which is the equivalent of 2,000 football pitches is welcome. If channelled effectively this could improve the lives of millions of people across the country providing much needed new housing and spaces in areas that have been neglected for too long. Looking at the key sustainability agenda, this approach confirmed today should be prioritised over developing on other valuable green field sites which can cause loss of vital natural space. We would however welcome a further government commitment to the sustainable development of these brownfield sites so that where possible, existing buildings are preserved and sustainable materials are used.” – Tom Brown, managing director, Ingenious Real Estate
“The government’s new £1.8bn brownfield fund proves that sweeping planning reforms are anything but dead under Gove. Today’s announcement proves that ministers still see the benefit of redeveloping vacant or derelict sites to bring new investment into areas and increase housing delivery. The Treasury reckons that 160,000 homes could be built on brownfield land across the UK. However, if anything, these estimations are too conservative. Either way the government is rightly providing an opportunity for developers to transform neglected urban spaces. What’s more, the transport infrastructure often required for new housing developments already exists on most brownfield sites, bringing down capital costs and accelerating construction programmes. However, in order to reduce disruptions to local communities, policymakers should be pushing for a requirement that would mean more of the homes being built on brownfield sites are manufactured off site. With 90 percent of the build stage taking place in a factory, companies such as ourselves can drastically reduce vehicular movements to site and consequential emissions.” – Jordan Rosenhaus, CEO, TopHat (a Goldman Sachs-backed modular housing supplier)
“The chancellor confirmed again that levelling up is at the core of the government’s policy agenda and gave some indication of how public spending will be used to support critical building blocks such as infrastructure and housing supply. The £1.8bn allocated to brownfield development is a positive commitment to regeneration and will unlock underutilised sites across the country and create new opportunities for SME property investors and developers. We will need to see further details in the promised levelling up white paper however to understand how the millions of pounds of investment our sector represents can partner effectively alongside national and local government to deliver the built environment which is critical to levelling up across the country.” – Melanie Leech, chief executive, British Property Federation
“The chancellor has missed the opportunity to give householders peace of mind about how they can tackle the net zero challenge. With nothing on retrofit for owner occupiers in last week’s Heat and Buildings Strategy, I’m struggling to see how the country will reach its legally binding net zero targets by 2050 if it doesn’t fix the UK’s 29 million leaky homes. I do, however, welcome the investment for skills and training confirmed at £3.8bn over this Parliament. Long-term skills shortages are delaying jobs for builders, with 60% reporting paused jobs in the latest FMB membership survey. I’m also glad to see further investment in housing, and warmly welcome the grant funding for local authorities to free-up small brownfield sites for housing given that land availability is the major obstacle to SME house builders. Relief for businesses by reducing the burden of the business rates system will be well received by some firms.” – Brian Berry, chief executive, Federation of Master Builders
“Today’s budget saw limited new announcements on infrastructure, which much of the welcome funding for city transport schemes and the levelling up fund grants being money that had previously been announced. No doubt the chancellor had other things on his mind with the cost of living crisis and NHS spending pressures. One thing that didn’t seem to be much on his mind was COP26. Although there were some useful small scale measures such business rates relief for green property improvements, there was also some distinctly mixed messaging with the APD cut and fuel duty measure. The chancellor missed a trick here – a long term funding commitment for the rail electrification that will be needed to hit rail decarbonisation targets would have shown commitment to the hard yards of delivering net zero. For the consultancy sector specifically, the extended scope for R&D tax credits may be useful as the industry continues its digital transformation, and the continued commitment to Project Speed was good to see – modern digitally enabled consultancy holds the key to unlocking infrastructure delivery and performance.” – Matthew Farrow, director of policy, Association for Consultancy & Engineering
“The investment in building new homes on brownfield land and funding for ‘pocket parks’ in urban areas is a step in the right direction towards much need place-making for our towns and city centres if they are to become sustainable areas and attract a broader demographic bandwidth. Whilst some may criticise the funding as tokenistic, if leveraged effectively with private sector commitments, the impact of the £2bn will be significant.” – Keith Hardman, head of development & strategic advisory, Cushman & Wakefield
“The money earmarked for roads, railways, schools and hospitals is what the construction industry hoped for. It is especially encouraging that the levelling up programme spreads the benefit around the UK. The extension of the annual investment allowance (AIA) relief of 100% on capital expenditure of £1m will also be a big boost to construction firms. However, most of this – aside from the AIA extension - serves to boost demand but does nothing about supply, which remains a major issue. The Chancellor can’t do much about the cost of materials but he can do something about labour. He recognised the value of people with certain skills coming to the UK but it is unclear (and unlikely) the new visa system will do much for the construction sector. Two-year visas for key construction workers would have been the single best thing he could have done to address the shortage of labour in the industry. The fear must be that all of his investment promises won’t go as far as he would like but will instead just push up costs because business can’t source the labour. Over the long term the funding promised for T-levels and other programmes should help. Here construction has an opportunity to secure a workforce of the future. The industry needs to support these initiatives by sponsoring training with visits to construction sites, open days and work experience. Construction needs to assert itself as a career destination for young people because, for political reasons, labour from overseas looks less of an option.” – Brendan Sharkey, partner, MHA (accountants)
“Building on brownfield land is one common sense solution to alleviating the housing crisis and the £1.8bn announced in the budget to support brownfield development is welcome in principle. However, while a vote-winning announcement, funding is not enough alone if projects cannot get through our archaic and overly complex planning system. What is missing from today’s announcement is a commitment to fixing our broken planning system so that these viable projects can actually be delivered. Without planning reform, an issue which rapidly seems to be slipping down the political agenda, there will continue to be a shortfall between housing need and the number of new homes being delivered. This is one of the reasons we started our campaign for planning reform, calling on compulsory training for all planning committee members and for at least 50% of members to have a formal qualification.” – Stephen Wicks, CEO, Inland Homes
“While the next phase of business rates relief is welcome, this seemingly endless tinkering underlines the need for a longer-term reform to support high streets and help restore them into the thriving commercial centres that communities want to be proud of. The devil will be in the detail and our surveyors will need clear, unambiguous guidance from government to help businesses to make the most of this new support. Chancellor Sunak didn’t mention the need to retrofit, rather than demolish, existing buildings – a key to unlocking Net Zero carbon emissions for construction in Britain – but the £3.9bn pledged to decarbonise homes and offices, which included support for low income homeowners to transition their heating, is a good start. The £5bn for cladding replacement – which we already knew was coming since February – will give more leaseholders greater peace of mind that their homes will be made safe but it’s still well short of the £15bn needed that is estimated to fix every building, but the additional funding to deliver a hundred and eighty thousand much needed affordable homes is welcome.” – Jonathan Hale, head of government affairs, Royal Institution of Chartered Surveyors
"Todays’ budget, for us operating in property and construction, felt a little like a hotly anticipated meal where Chef had leaked much of his surprise menu in advance & when it came to it, the showstopper was something of a soggy soufflé. For instance last weeks’ news on the governments heat and buildings strategy, gave the chancellor a chance to announce serious funding for a long term national retrofit programme to improve the energy efficiency of the UK’s 30 million buildings but we heard nothing and news of the much delayed revised integrated rail plan was also absent . There was £1.5bn in new money to improve transport links which is welcomed plus £1.8bn for brownfield residential building and £3.8bn to build new prisons. Investment relief on business rates for green improvements is also welcomed as were new discounts on rates for retail and hospitality. But when achieving Carbon zero is seen as a bigger issue by most people than Covid, the lack of investment in this area was a missed opportunity.” – Graham Harle, CEO, Gleeds Worldwide
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