So the waiting is over, the endless trailing and pre-briefing is now replaced with the reality of what The Chancellor has announced today. So what are the headlines for the homebuilding, construction and infrastructure sectors?
The reality is perhaps there was not too much new news. Much of what was announced we already knew in terms of areas of tax rises and the creation of a new ‘Investment Rule’ which redefines allowable future government debt ratios and gives additional headroom for capital spending on assets including infrastructure.
There remain many questions of how capital spending will be implemented but notable announcements on setting new value for money ‘guardrails’ that will impact construction include:-
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- The National Wealth Fund responsible for funding infrastructure spending will be held to account on return on investment to at least match government gilt returns
- There was specific reference to improving infrastructure delivery, assumably a nod to the newly formed National Infrastructure & Service Transformation Authority (NISTA)
- 5 year capital plans to be established, updated every 2 years. There is a promise to deliver a 10 year infrastructure strategy at the Spending Review in Spring 2025
There was reference to the already announced government intervention into HS2’s management and attempts to get the budget back under control. There was good news though in relation to commitment to the Old Oak to Euston tunnelling commencement which would seem to indicate the previously halted Euston station redevelopment proposals are back on the agenda.
There was some limited reference to commitment to other transportation projects including the Transpennine Route and East-West Rail which will also be welcomed.
Energy security was also referenced through confirmation of the establishment of GB Energy, and commitment to 11 new green hydrogen projects.
Commitment to devolution was recognised with both GMCA and WMCA confirmed as having fully ‘integrated’ settlements which assumably will include devolved funding for housing, skills and transport?
A specific reference was made to ‘future skills’ and an additional £300million funding to Further Education. It is unclear where this will be spent in terms of sectors or outcomes. There is however encouraging reference in the subsequently released full Budget document to foundation and shortened apprenticeships which may well address issues being faced in construction getting trainees more productive quicker and introducing more flexible ‘modular’ pathways into work.
On social infrastructure, £6.7 billion of capital funding was confirmed for DfE of which £1.4 billion is earmarked for school rebuilds. It is unclear how much of this is truly additional to previously announced multi year funding for the new schools programme.
Similarly, the signficant funding commitment to the NHS includes £1billion for repairs and upgrades and £1.5billion for capacity building which will include new diagnostic centre delivery. 7 identifed hospitals subject to RAAC structural defects have had capital allocations made. However, there was no advance reveal of the Health Secretary’s review of the New Hospitals Programme and this will have to wait until the New Year.
No doubt there will be more detail announced on infrastructure spending in the full ‘Phase 2’ Spending Review in Spring 2025.
When it comes to homebuilding, the announcements again had largely already been leaked, including:-
- £500m top up to Affordable Homes Programme funding 5,000 social rent homes
- reduced Right to Buy discounts and ringfencing of receipts for local authorities to reinvest in replacement affordable stock
- a new rent settlement for social housing providers at CPI+1% for next 5 years, so still falling short, at least until the 2025 Spending Review, of the 10 year settlement requested by the social housing sector
- £46m funding for new planning officers
- additional £1billion support to accelerate cladding remediation works
There was also a headline reference to £3billion in ‘guarantees’ with a specific call out to supporting small housebuilders and the BTR sector and the detail of this will be eagerly awaited. It is unclear how much of this is truly additional to already announced funding. is overlapped or is in reality repackaging of underspent current funding programmes being run by Homes England. Hopefully this is some real funding additionality which is desperately needed to unlock new homes delivery and support on the ground delivery alongside already announced planning relaxations which in themselves will not get more homes built.
In terms of housing market tax changes, an increase in the second home surcharge will further dampen investor demand in housing alongside the already announced tax burdens starting to impact the buy to let sector. There was no ‘Help To Buy’ type demand side stimulus as requested this week by the HBF but a 95% mortgage guarantee scheme is being consulted on and further announcements will be made in due course.
From a skills and training perspective, there will be concern about the impact of the announced 1.2% increase in Employer’s National Insurance to 15% from April 2025 when combined with the significant 16.3% increase in the National Minimum Wage for 18-20 year olds to £10 / hour. The concern from employers will focus mainly on the financial impact on taking on and retaining apprentices and trainees at a time when the industry is struggling to invest in the new skills it needs when set against the backdrop of a difficult trading environment. The Employment Allowance increase will help micro businesses on NI burden but there is still likely to be high sensitivity across the industry to marginal cost of employment which could affect propensity to employ or retain staff.
So in summary, there were no real surprise rabbits being pulled out of the hat for the property and construction sector and most attention will be how the markets react to the budget as part of an overall economic recovery trajectory into 2025.
As a footnote, there will no doubt be much consternation within the construction industry as to the continued lack of political appetite for more proactively safeguarding a healthy construction sector to drive economic growth. The announcements made today of £1billion additional standalone funding for the aerospace sector and £2billion for the automotive sector will no doubt rub salt into the wounds of the industry after construction failed to be seen as a ‘growth’ sector in the recently launched modern industrial strategy. This only underlines the continued apparent inability of the construction sector to lobby coherently and attract the very real help (and funding) it needs to resolve its structural problems, especially in relation to resource security and productivity.
