George Osborne: a difficult Spending Review for the construction sector.

Industry voices its concerns

Published:  17 January, 2011

The Government’s Spending Review has received mixed reviews. Here, Builders’ Merchants News offers the industry’s comments about what is good and bad and how this will impact on the future of business in the construction sector.

For the great majority of builders’ merchants and medium-sized builders, this autumn’s spending review makes grim reading. Spending cuts spell the end of much construction work: no more new libraries, town halls or youth centres, police or fire stations. And very few houses – social or private.

On every level this spending round represents a huge gamble. The construction industry undoubtedly has the capacity to respond but it needs support from central government. Private money is not going to fill the spending vacuum: it is unlikely that squeezing the poorest for rent rises will produce the revenue to build more social housing or that banks will ease lending to trigger the housing market.

George Osborne has launched a programme of massive change and it matters not whether you approve of that change or not. Quite simply, the change is too much and too fast. Changes of this scale take time and many companies do not have the resources to provide that time.

Although there are tough times ahead for the construction and property sector, John Alker UK-GBC director of policy and communications believes the Green Investment Bank, the Green Deal and the Renewable Heat Incentive offer the tantalising prospect that tackling climate change could go hand-in-hand with job creation, and refurbishment of our existing building stock.

The Builders’ Merchants Federation concurs and reports that following the Spending Review, there is a business landscape that is not all gloom and doom. The Decent Homes programme will continue – but funds have yet to be outlined. The New Homes Bonus will proceed – but no new details were provided. In the Spending Review, the BMF pointed out, there was no mention of the definition of zero carbon homes or a clear planning policy guidance since the abolition of Regional Spatial Strategies and the housing targets.

The Renewable Heat Incentive – offering subsidies for heat generated from solar, heat pumps and biomass will be introduced from April 2011 as promised, with £860m to be made available.

Feed-in Tariffs for electricity microgeneration will remain at current rates until 2013 and then be cut by £40m after an already-planned review in March 2013.

The Warm Front scheme – providing insulation grants for the vulnerable – will be phased out prior to the passing of new legislation ‘Green Deal’ as an obligation on energy suppliers.

Sadly, there was no mention of extending the current 5% VAT rate for certain goods and services in order to incentivise homeowners to carry out home improvements that de-carbonise their property. As for training, programmes like Train to Gain will be abolished, but there will be more spending on adult apprenticeships by up to £250m a year over the next four years.

Keith Jones: The Spending Review is a welcome and positive step towards the green agenda.

“It is goodbye to the mess that was the Learning & Skills Council – and extra money for apprenticeships is welcome,” said BMF’s head of policy, Brett Amphlett. “The Government has pledged to meet its commitment to rebuild or refurbish 600 schools and academies following the closure of the Building Schools for the Future Programme,” Mr Amphlett said.

“Essential hospital maintenance and priority new schemes will go ahead, with more money allocated to flood defence and coastal erosion projects over the four-year period. Some planned prison maintenance and essential newbuild works will go ahead.”

According to Chris Pateman, the BMF’s managing director: “We regard initiatives like the Renewable Heat Incentive and the Green Deal as the best opportunity to grow the RMI market and encourage homeowners to invest. Both emerge largely unscathed from the Spending Review. Our task now is to ramp up our efforts to ensure improvements are carried out by professional local tradesmen, buying fit-for-purpose products from professional local merchants – not by DIY amateurs.

“Our message to politicians is a thriving RMI market is the way to revitalise local economies.”

“It’s going to be a tough winter, But not, I think, an entirely hopeless one,” Mr Pateman said .

Andrew Price, chief economist of Halcrow, a company that delivers planning, design and management services for developing infrastructure and buildings worldwide. “George Osborne has preserved infrastructure spending as part of the Government’s high-level vision to rebuild Britain, but doesn’t set out strategic policies to support delivery and long-term growth.

“Mr Osborne slashed £81bn from the budget and confirmed the sectors where investment would be made. Spending on infrastructure will be a priority and the National Infrastructure Plan will soon be launched,” Mr Price said.

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