The UK construction sector is braced for the spring budget on Wednesday (15 March), which could signal a slowdown in infrastructure investment but fresh money for low-carbon initiatives
Chancellor Jeremy Hunt will take to the dispatch box at about 12.30pm tomorrow to deliver a budget that may be more fiscally expansive than had been feared, given the UK is now expected to avoid the recession that was widely predicted last year.
In the lead-up to the announcement, the construction sector has issued plenty of demands. Last month saw workloads stoop to their lowest level in a year and the government’s decisions on key infrastructure projects have not instilled confidence. Last week, it delayed work on the Lower Thames Crossing in London and parts of the HS2 high-speed rail megaproject; it is due to spend 25 per cent less than expected on “levelling up” historically underinvested regions of the UK; and rampant inflation has cast doubt on its pledge to build 40 hospitals. In Wales, major road-building schemes have been scrapped.
Allan Wilen, economics director at construction-intelligence provider Glenigan, said that the civils and infrastructure work announced in the chancellor’s autumn statement “ran into the sand at the end of last year”. He suggested that the latest budget “might present an opportunity for the government to expand on these plans”.
Politicians seeking to stimulate growth have in the past looked to construction and “shovel ready” projects to kick-start the wider economy. The question now is about the extent to which 2023 will see similar investment pledges.
“Construction investment is often seen as a lever of growth, given the multiplier effect [of investment and its knock-on effects throughout the economy], and the chancellor has to announce some stimulus measures to get our economy moving in the right direction or we’ll be bumping along the bottom for years,” says David Crosthwaite, head of consultancy at the Building Cost Information Service.
According to the Guardian, up to £20bn is set to be pledged to reduce the UK’s carbon emissions, alongside a reset of the government’s plans to back the development of small nuclear reactors and a wave of green investment, mirroring efforts in the United States. This is likely to be the primary infrastructure investment announced.
But the industry continues to call for investment in energy-efficiency retrofits. While the government pledged £6bn for green building upgrades in the autumn statement, significantly more money is needed to ensure the UK meets its net-zero carbon goals.
The British Property Federation (BPF) argues that the government has a critical role to play in supporting homeowners and needs to act to relieve the pressures facing those in the residential sector, to ensure that the UK meets its net-zero target. The BPF is calling on the government to zero-rate VAT on building repair and maintenance of residential buildings to incentivise essential upgrades across the residential sector.
The current approach of targeted VAT relief on the installation of energy-saving materials is ineffective, as it fails to recognise that energy-efficiency improvements are rarely carried out in isolation, it has been argued.
The issue could form part of a budget announcement relating to commercial properties, which are coming under increased pressure for their energy efficiency to be overhauled. Many commercial landlords have until 2027 to ensure their Energy Performance Certificate rating is a C or above, or face being left with unlettable offices.
“Eighty per cent of commercial and residential buildings that will exist in 2050 – the deadline for reaching net zero – have already been built,” says BPF chief executive Melanie Leech.
“The government needs to recognise the importance of incentivising energy upgrades across both the commercial and residential property sectors in next week’s budget. The chancellor has a clear opportunity to alleviate costs for households and encourage investment in measures that improve a property’s energy efficiency.”
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