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Sat August 08 2020

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Chancellor's summer statement: the construction industry responds

9 Jul Chancellor of the exchequer Rishi Sunak has announced a raft of measures to help the economy and support jobs in the second phase of his coronavirus economic recovery plan. Here is a selection of comments in response from across the construction industry.

Chancellor of the exchequer Rishi Sunak
Chancellor of the exchequer Rishi Sunak

Broadly speaking, the chancellor's proposals [read about them here] have been well received so far, although some would have liked him to go further, perhaps extending the Help to Buy scheme or reducing VAT on domestic construction works.

Wates Construction managing director Paul Chandler said: “The chancellor highlighted the importance of the construction industry in his announcement and specifically the house-building sector, which is directly responsible for more than a quarter of a million jobs and the stamp duty cut will undoubtedly provide much-needed confidence in the housing market.

“However, more people buying and selling houses does not necessarily translate into more houses being built and so other issues such as planning reform must also be tackled simultaneously if we are going to deliver the homes – and the associated jobs – that this country desperately needs.

“At the heart of the government’s announcement today was sustainability and a recognition of the huge opportunity for growth in the ‘green’ sector but the big challenge for the government in this area is one of ambition.

“The numbers announced today are not insignificant but while the intent is unquestionably sound, the quantum impact may not be as transformational as the government may hope.

“Today’s announcements are an important first step in kick-starting the UK economy but what we need next is a long term strategy that recognises and then tackles the major challenges facing the UK in the years ahead such as the levelling up of the regions, population growth and the climate emergency, not to mention the impact of Brexit.”

Interserve Construction managing director Paul Gandy said: “As one of the country’s leading education and healthcare contractors we welcome the chancellor’s announcement regarding the government’s green building agenda for schools and hospitals, his investment in traineeships for 18- to-24-year-olds and apprenticeships.

“As the country emerges from the coronavirus crisis and construction activity resumes, job protection and job creation must form part of the economic recovery and the new funding for traineeships and apprenticeships will ensure that the UK construction sector can revamp its skills systems to support the government’s vision.

“Following the prime minister Boris Johnson’s announcement on the government’s transformative £5bn rebuilding programme for schools and hospitals across England, the chancellor has delivered a further stimulus to the economy where the construction sector will play a pivotal role.”

Civil Engineering Contractors Association chief executive Alasdair Reisner said: “The chancellor’s summer statement contained important initiatives to protect jobs as the furlough scheme comes to an end. We strongly welcome steps taken to support trainees and apprenticeships, which are the lifeblood of our industry. “The infrastructure sector faces a potential challenge as it is expected to come up to speed at the same time the furlough is removed.

“The chancellor’s decision to support businesses who retain or hire previously furloughed employees will be vital to boosting the economy and preventing job losses as far as is practicable. However, it is unclear how this move will not penalise companies that didn’t furlough employees, which include many of our members, who under government guidance returned to work as soon as suitable safety measures had been implemented.

“It is nonetheless gratifying that the chancellor made special mention of the £39bn the construction industry brings to the economy.

As we look towards the post-pandemic world, we look forward to working with government to streamline project delivery, unlock investment, and ensure our members can deliver the economic growth necessary to secure the UK’s recovery.”

Mark Cowlard, UK chief executive at Arcadis, said: “The measures announced today are all about getting money into the economy now. With more than £30bn up for grabs, construction came out as a real winner, thanks to the effectiveness of the construction sector in directing jobs and spend into local communities. Measures totalling £13bn will go a long way towards tackling an uncertain future, helping to support sustainable construction, develop future skills and stimulate demand in the housing market. 

“This is about laser-targeted spending. From £2bn worth of green homes grants to a funding package to accelerate energy efficiency in public buildings, the measures have all have been cleverly structured to get money into the economy and create jobs with the minimum of barriers.

“It feels like a coherent package which, together with the prime minister’s commitment to infrastructure spending last week across the north and the midlands, starts to lay the foundations for a balanced and green recovery.”

House-builders were particularly pleased with the stamp duty land tax threshold being raised from  £125,000 to £500,000.

Vistry Group chief executive Greg Fitzgerald said that “the timing could not be better”. He said: “The sector, like many across the economy, has faced significant challenges in the last few months and we believe this initiative will give customers the extra confidence needed to take the exciting step of owning a home or moving up the property ladder.

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“We have seen that interest from potential buyers has been encouragingly strong and robust week-on-week since the lockdown started to ease, and we believe this move on stamp duty will go a long way towards reinvigorating the market.”

Redrow chief executive Matthew Pratt said it was “a positive step to stimulate the housing market and wider economy” but wants the Help to Buy scheme extended as well.

Matthew Pratt said: “The measures will have a much-needed domino effect, also supporting suppliers, subcontractors and consultants to the housebuilding industry, as well as boosting businesses supplying goods and services related to moving home such as furnishings, white goods and many others.

“The immediate implementation of these measures is positive, as waiting risked the market grinding to a halt. Now we can be confident the measures will get people moving, spending and contributing to the country’s economic recovery. Once the stamp duty holiday is over, we call on the government to undertake a wider reform of this tax to reduce the significant sums of money involved, which create a major barrier to many wishing to make a move.

“Stamp duty is just one barrier. Despite the home building industry coming to a standstill for the best part of the last three months, the Help to Buy clock has kept ticking towards the deadline. 

“Thousands of potential home owners across the country will now lose out through no fault of their own and that can’t be right. And of course the conclusion of the current scheme now coincides with the end of the stamp duty holiday and we think this needs to be carefully reconsidered to avoid a cliff-edge of support for customers.

“We call on the government to extend the deadline for the scheme to ensure customers aren’t unfairly disadvantaged and buyers, at a time when they more than ever need the support of Help to Buy, continue to have access to it”.

Crest Nicholson chief operating officer Tom Nicholson said: “The stamp duty break, Green Homes Grant scheme, and incentives for companies to bring back furloughed employees and get young people into the industry, will be crucial to increasing affordability for many buyers, and helping the industry and economy recover.”

Jan Crosby, UK head of infrastructure, building and construction at KPMG, said: “The stamp duty cut until 31st March will be welcomed by the housing sector and those looking to move house.  However, the market has already been motoring since lock down has been relaxed – pricing has remained stable and new reservations have been high.  This has demonstrated the large pent up demand that still exists for home ownership and it has been accelerated towards family housing with gardens following people’s experiences through lock down.  The stamp duty cut may therefore not have been needed. More important is providing longer term clarity on help to buy, unlocking funding for SME housebuilders to play their part – many of whom have not been supported through CBILS [the coronavirus business interruption loan scheme] and accelerating the provision of affordably priced key worker family accommodation across the country.

“Energy efficiency retrofitting has long been needed and the funding of £5,000 per household to kick start decarbonising existing housing stock is welcome. It should also have the double impact of providing funding to create the volume conditions needed to help with the maturing and perhaps lowering of price of energy efficiency technologies, while facilitating jobs for SMEs in the sector. All this comes alongside the welcome impact on the carbon footprint of existing UK housing, of course.”

Some thought that construction could benefit from the sort of VAT break given to the hospitality sector, since VAT on domestic repair & maintenance is what underpins rogue traders.

Brendan Sharkey, head of construction and real estate at tax accountants MHA MacIntyre Hudson, said the decision not to extend the VAT cut to the construction sector was a mistake and will cause further pain to an already battered industry. “Although the new planning regulations the government is preparing are very good news for the construction sector, the prospects for the industry would have looked better if the chancellor had complemented them with a VAT cut. Taken together, lower costs and greater flexibility could have created a boom in home extension projects, particularly as interest rates are low. This would have been a lifeline for SMEs, creating a surge in small projects that could have been started quickly and reinforcing cashflow. But all of this has now been missed.

“The stamp duty land tax exemption is a really good move on paper, as it encourages first time buyers and those looking to upscale to take the plunge and enter the property market. It also creates an opportunity for downsizing. The real question is whether this move stimulates action and purchases rather than just an increase in website traffic. Lenders will be looking for higher deposits to protect themselves against falling values, which are now likely given the predicted rise in unemployment. In normal times, today’s SDLT announcement would be a great opportunity and would bring joy to house builders, we have to hope that in these unusual times this will still prove to be the case.”

“The £3bn investment in green jobs is a great boon for the sector. The only concern is whether the work can be spread around. Jobs created through green projects do sometimes favour larger companies, who are better at advertising for them and meeting regulating requirements. It would be a shame if SMEs missed out on the majority of jobs created this way.” 

UK Green Building Council chief executive Julie Hirigoyen said: “The chancellor has recognised the huge potential of energy efficiency to create jobs, and the money announced today for upgrading buildings is a much needed first step.

“In respect of homes, we urgently need more detail on how the green homes grant scheme will be implemented. Done well, it has the potential to kickstart a retrofit revolution across the country, but, done badly, this could cause more harm than good to people’s homes and to the industry. It's crucial to avoid the mistakes of previous retrofit schemes by ensuring that all measures and installers under the scheme are properly accredited and deliver real improvements. The allocation of £50m to social housing is also a welcome announcement, although frankly just a drop in the ocean compared with the Conservative manifesto commitment of a £3.8bn social housing decarbonisation fund – far more of which should be brought forward immediately.

"Furthermore, given that today’s announcement contained a range of financial incentives and tax cuts, it missed the opportunity of tying these in more directly with the green buildings agenda. UKGBC has previously called for a VAT cut on refurbishments and variable stamp duty rates as incentives to drive up consumer appetite for more efficient homes, which would stimulate demand for these cash grants.

“Finally, we urgently need confirmation that today’s announcements are part of a clear, long-term and ambitious plan to bring all our 29 million homes and circa two million commercial buildings up to decent standards of efficiency. Such a plan would include target dates for minimum energy efficiency standards across all property types, and a range of policy and fiscal measures to ensure these can be met. This is not only vital to reaching net zero, but also for ensuring that industry, and the supply chain in particular, can gear up and invest in both the skills and innovations required.”

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