Home » Pre-election gambit is a mixed bag for construction

Pre-election gambit is a mixed bag for construction

by Tim Clark
Jeremy Hunt presenting his Spring Budget, March 2023

The Chancellor may well have had his eyes on the inevitable election campaign to come, but for the construction industry, the Autumn Statement leaves more pressing – and practical – concerns. Tim Clark reports

It is quite possibly the penultimate financial statement from the government prior to the next general election.

And, going into an election year, any chancellor’s Autumn Statement is often viewed as a pre-election giveaway for voters, industry, and financial backers.

The headline takeaways for construction included £50m for new engineering apprentices, and allowing local authorities to recover the full cost of major commercial planning applications, as long as certain conditions were met.

There was also a £450m fund for local authorities to deliver 2,400 homes, £500m to help turn the UK into an AI powerhouse; tax relief for research and development, just over £500m for life sciences, and a further £960m for clean energy and green industries.

A raft of new investment zones were promised, and tax relief for freeports extended from five to 10 years.

The government also included £50m for “high quality regeneration projects”, which will be available from next April.

For the construction sector, it can be argued that the latest announcements add up to a mixed bag. A sprinkling of exciting announcements, such as turning the UK into an artificial intelligence powerhouse, were weighed against a fairly sparse project list. Less than the sum of their parts, it’s leaving an industry confused as to what the government’s actual priorities are.

“The Autumn Statement was really quite underwhelming for the construction industry, which has been crying out for some clarity, commitment and consistency in policies,” said Dr David Crosthwaite, chief economist at the Building Cost Information Service (BCIS).

“Crucially, the already delayed National Infrastructure and Construction Pipeline is still nowhere to be seen, with the government saying it will publish a National Infrastructure Strategy next year.

“Investment in infrastructure, and removing barriers to private sector investment, is hugely important to driving economic growth. With the Autumn Statement, construction firms operating in an uncertain market have simply had that uncertainty prolonged yet again.”

Crosthwaite’s observations highlight an infrastructure-light Autumn Statement from Hunt. One area in particular which seem primed for more detailed announcement was the replacement of the funding previously allocated to High Speed 2’s (HS2) phase two.

HS2 itself was barely mentioned in the announcement, making two appearances within the Treasury documents accompanying Hunt’s speech. In it, the government said “the government’s decisions on HS2 will deliver £36bn, of savings that will be reallocated to Network North, an ambitious pipeline of alternative transport projects which will drive growth and connectivity in the great towns and cities across the North”.

In infrastructure terms, this was old news. Crosthwaite’s views were shared by others in the sector.

Colin Wood, chief executive, AECOM Europe and India said that the lack of new infrastructure, though unsurprising, was disappointing.

“The chancellor billed this as a pro-growth statement. However, with current strains on the public purse and the potential to re-stoke inflation, the likelihood of significant investment in infrastructure was always limited.

“Even so, the lack of any new meaningful investment to boost the UK’s pipeline is disappointing. Infrastructure is, after all, the foundation for wider economic growth,” he said.

Graham Harle, chief executive of consultant Gleeds, was equally as scathing. “This was an Autumn Statement by a government that appears to have little insight into the challenges faced by those working in property and construction, having shuffled 16 housing ministers in 13 years and just cancelled HS2,” Harle said.

“Of the measures announced, full expensing is to be welcomed but is only helpful if you have projects requiring you to buy plant and machinery. It doesn’t help firms struggling to make a profit or investing in people. It’s all jam tomorrow, and while planning reforms sound appealing they take time to implement and may not be supported by any future government.

Simon Hochhauser, chief executive of PiPcall, an advanced communications system for construction companies, was similarly disappointed.

“The industry’s role in boosting the UK’s prosperity should not be underestimated – from improving energy efficiency to building new homes and buildings for our public services – construction businesses large and small underpin the country. And yet, it’s no secret that amid economic challenges and rising interest rates, the industry as a whole is facing its most notable downturn since the pandemic […]

“A robust digital infrastructure that prioritises mobile is fundamental. With a range of emerging mobile innovations now available, poor communication on-site should not be the thing that stifles industry progress.”

The were some areas for optimism however. Underneath the section titled “removing barriers to investment, the chancellor published details of the infrastructure delivery policy paper, which will include publishing spatial data on major infrastructure projects for the first time and ensuring a more reliable process

According to Marie-Claude Hemming, the Civil Engineering Contractor Association’s (CECA) director of operations, the policy paper is a firm shift in the right direction.

“In our recent policy document, CECA called for construction to be put at the heart of policy making, with the establishment of a cabinet committee for infrastructure, and we welcome that this suggestion has been adopted by the government.

“We also welcome moves to make full expensing permanent, allowing companies to claim 100% capital allowances on qualifying plant and machinery investment.”

Chief executive of proptech firm Wondrwall Group, Daniel Burton also said that, in terms of digital delivery and net zero, whilst not overly exciting, the Autumn Statement did lay “promising foundations” for future.

“After months of mixed signals and worrying rhetoric on carbon zero goals, grounds for optimism have finally emerged. The long-awaited plans to speed up the connections process for low-carbon infrastructure are welcome.

“However, we must still focus on supercharging investment at the grid edge and creating smart local energy systems to combat immediate barriers to the UK’s infrastructure and grid capacity.”

Can the UK be an AI powerhouse?

Driving innovation is one of Chancellor Hunt’s priorities, and when it comes to AI, the government has been keen to turn the UK into a global leader in what it sees as a major new industry for UK plc.

Construction is one sector which could, and for many, should be revolutionised by the advance of digital and AI innovations. The government seems to agree.

The Treasury said the UK would “embrace opportunities” across the public sector of “cutting-edge technology like AI.

It further stated that “the potential productivity benefits from applying AI to routine tasks across the public sector are estimated to be worth billions.”

The government recently announced a new Incubator for Artificial Intelligence, which it stated would be “an elite team of technical experts at the heart of government” that will help departments to harness the potential of AI to improve lives and the delivery of public services.

It may be possible to extend this to the private sector, such as construction, at some point, however it may be unlikely.

Other commentator’s lament the lack of real funding for skills. Eddie Tuttle, director of policy, external affairs and research at the Chartered Institute of Building (CIOB) said that the issue is one of the biggest facing the construction sector.

“The Construction Industry Training Board (CITB) research recently revealed nearly 45,000 extra workers are required each year just to meet construction demand by 2027,” he says.

“While CIOB welcomes the government’s commitment to invest £50 million in apprenticeships for key sectors like engineering, it is unclear whether the construction sector more generally, which has traditionally been reliant on apprentices as one way of generating new employment, is included in this investment, particularly when shortages are prevalent and have been highlighted across the industry.”

The £50m available for engineering apprenticeships is welcomed, however Crosthwaite echoes the CIOB’s concerns, stating that the funding doesn’t “address a wider skills gap we have across construction”.

Green shoots of a real net zero policy?

Aecom’s Wood did welcome the growth accelerator for green industry: “The £960m for a Green Industries Growth Accelerator is welcome investment that will support the growth of clean energy supply chains.

“Advancing the production of clean energy solutions is vital for boosting the UK’s energy independence and today’s new funding is an encouraging commitment from government that shows it recognises the long-term value of supporting these fledgling green industries and their export potential.”

It may be that the government has heeded the backlash from the wider industry over it’s surprise announcement that it was relaxing net zero goals earlier this year. According to Simon McWhirter, deputy chief executive of the UK Green Building Council, the Autumn Statement contained some rollbacks of the anti-net zero agenda proposed only as recently as September.

“The government heard the furious backlash to its green policy rollback last month; and this was a chance to realise the scale of their error by shoring up protections for struggling households and small businesses, and get energy bills and carbon emissions under control,” he said.

In all, the Autumn Statement contained enough for the construction sector to ponder how it can make use of a number of policy promises, extra tax relief, and some movement on establishing long-term improvements in productivity and innovation.

Yet as a pre-election gambit, the chancellor’s major financial statement may have simply got construction pondering what any post-election government may have in store. For many 2024 cannot come soon enough.

Image credit: Simon Walker/Number 10 Downing Street

Read next: Can digitisation shift the dial on carbon emissions?

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