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Fri April 03 2020

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Budget 2020: £128bn a year for infrastructure

12 Mar The first budget statement from new chancellor of the exchequer has allocated £640bn to infrastructure over the next five years.

Chancellor Rishi Sunak at the despatch box in the Commons, delivering his first budget
Chancellor Rishi Sunak at the despatch box in the Commons, delivering his first budget

The detail of how the money is going to be spent had been expected on budget day, but publication of the National Infrastructure Strategy has been delayed until some unspecified date ‘later in the spring’.

However, chancellor Rishi Sunak delivered a few headlines, indicating that the Conservatives have dumped monetarism for Keynesianism, choosing to spend our way to growth.

£27bn has been allocated to Highways England’s road building programme over the next five years, for projects including the A66 in the northeast, the Lower Thames Crossing in the southeast and the A303 Stonehenge tunnel in the southwest – assuming it can fend of the inevitable legal challenges first.

There is also £500m a year for local authority highway maintenance – what the government likes to call ‘the pothole fund’.

There are also plans for a £12.2bn programme to build cheap public sector housing.

And flood defences will get £5.2bn over six years, the Treasury says.

Most of the headlines, however, have centred on the £12bn package of emergency measures to combat the economic impact of the coronavirus Covid-19.

The chancellor doing his homework
The chancellor doing his homework

Industry reaction

Construction Industry Training Board policy director Steve Radley said:  “The promised investment will create the need for tens of thousands more workers in Britain’s construction sector. This will require a major upturn in the number of apprentices and trainees; government will need to work closely with industry to deliver this.

“The huge pipeline of work will provide a unique opportunity for government to drive modernisation in how we build, encouraging the adoption of modern methods of construction that will improve productivity in a much tighter labour market.”

Federation of Master Builders chief executive Brian Berry said: “Understandably, the chancellor has delivered a ‘first aid Budget’ to overcome the short-term crisis caused by Covid-19. But he has missed an important opportunity to announce interventions that would support the sustainable, long-term recovery construction needs. The autumn budget must include measures to cut VAT on repair and renovation, and a national retrofit strategy to promote decarbonisation and create jobs and growth."

On measures to support businesses dealing with COVID-19, Mr Berry said: “Builders are increasingly concerned about the impact COVID-19 will have on their businesses. Today’s package of measures to support SMEs through refunding statutory sick pay, making temporary loans and grants available, and support for the self-employed will provide welcome relief to small building businesses and their workers alike." 

On housing, he said: “An investment of £13.7bn in housing is welcome news. However, there was no mention of how the government plan to support SME house builders. Master builders are facing major barriers finding land, accessing finance and skilled workers – these will all need addressing if we are to build 300,000 homes a year.”

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Mark Robinson, chief executive of Scape Group, said: “Confirmation that the chancellor will double the amount of funding available for flood defences to protect homes and businesses comes as welcome news. Much of our water infrastructure is from the Victorian era and desperately needs to be maintained and upgraded, but revenue expenditure had risen by just £3m over the last 10 years. This investment will be ineffective though, unless we think critically about how we work together. Harnessing the knowledge and expertise of our experts and collaborating to operate across boundaries to deliver essential infrastructure must be a priority.”

Rick Green, chair of the Asphalt Industry Alliance, was more concerned about the ‘pothole fund’. He said: “Over £1bn has been wasted chasing and filling potholes on local roads over the last decade. What’s needed is sustained investment in effective road maintenance to improve the condition of our local roads and help prevent potholes forming in the first place.

“The £2.5bn extra funding over five years announced by the Chancellor today will certainly be welcomed by hard-pressed local authorities dealing with reduced highway maintenance budgets, the effects of extreme weather events such as the recent storms and an ageing network.

“However, £500m extra a year divided across English local authorities is still a fraction of the amount needed to deal with decades of underfunding, which have led to deteriorating conditions and a rising one-time catch up cost to fix the problem.

“It’s a positive move that the new government has recognised the need to allocate much-needed additional funding to our vital local road network. It is certainly a large step in the right direction and we look forward to hearing more detail from the secretary of state for transport. We believe that what’s needed is an investment of £1.5bn extra per year, for 10 years, to bring local road conditions up to a level from which they can be maintained cost effectively to ensure a more resilient network going forward.”

Rhys Harris, associate director of engineering, process & construction at Morson Group, was concerned about the skills shortage. He said: “Infrastructure spending was a real centrepiece of today’s budget as the chancellor laid out his commitment to unlocking construction and innovation throughout the country.

 “But to get Britain building and unleash the economy’s true potential, it is crucial that we have access to the right talent at all levels to ensure that businesses and their supply chains can attract and retain the right skillsets as and when they need them. Skills are the biggest barrier to us delivering on this ambition, therefore, government, businesses, education providers and talent solution specialists like ourselves must form strategic partnerships to create short and long-term skills frameworks and action plans – be it technical apprenticeships, upskilling, reskilling and attracting talent from overseas – that ultimately build active and agile talent pools that are the backbone of every healthy economy.”

Brendan Sharkey, head of construction and real estate at MHA MacIntyre Hudson, had similar concerns. He said: “Without question the budget is good news for construction overall; the measures to develop infrastructure, particularly new roads, flood defences and broadband will complement existing investment to ensure companies have enough work. Particularly welcome is the £1.1bn in funding earmarked for different regions of the UK through the Housing Infrastructure Fund; this will guarantee work for owner managed businesses outside the capital.

 “The cloud on the horizon is labour. It’s unclear whether the industry has the workforce for all the upcoming infrastructure projects and the new immigration system creates more uncertainty. Notably the chancellor did not announce reliefs or grants for capital investment, which would have been one obvious way to mitigate the labour issue.”

Graham Wright, infrastructure tax partner at Ernst & Young (EY), hoped that the budget might lift the nation and the economy, despite the lack of detail. He said: “With confirmation of the delay to the infrastructure strategy, we will have to wait for the detail behind the headlines of ‘Getting Britain Building’. However, as largely expected, the new chancellor announced a commitment to £600bn of investment over the next five years and new settlements for the regional mayors to help support the ambition of levelling up.

“As predicted, investment in sustainability, roads, rail and digital connectivity featured heavily, as did ‘green’ transport and the infrastructure to charge it. There were also a number of announcements to support the housing sector, and 40 new hospitals as part of the £6bn of investment in the NHS – a welcome move for a construction sector in need of good news.

“Despite saying relatively little about the detail of the promised infrastructure revolution, the chancellor has delivered a further confidence boost to investors and the construction sector today. Hopefully, this will kick-start a continuing trend of renewed investment and activity. Beyond this budget, the government and business will need to work together to identify ‘shovel ready’ projects and the resources and capabilities available to deliver them.”

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