mChris Pateman: A thriving RMI market is the way to revitalise local economies.

Industry voices its concerns 3

Published:  17 January, 2011

Neil Schofield, head of sustainable development at Worcester, Bosch Group, commented: “This was a big call by the Government and demonstrates real commitment to its aim of being green.

“It gives the heating industry a clear roadmap to follow and enables the sort of long-term planning that is required if we are to hit our climate change targets. My concern is that some technologies will be the recipient of funding while others will be left without. My message to the Department of Energy and Climate Change is that we need to be ‘technology agnostic’.

“The market for heating products will only function properly with equality of all technologies. The market must be left to decide. We do not want a repeat of the distortion the Feed-in Tariff has had on the solar market,” he warned.

Radiator manufacturer, Purmo UK’s sales and marketing director Chris Edwards was enthusiastic. “It’s excellent to see that the Government has nailed its colours to the mast in supporting the Renewable Heat Incentive after so much speculation. What we must remember, however, in the rush to use renewable technologies, is that we already have some excellent products which have been tried-and-tested over many decades. Radiators must be seen as part of the system solution when using renewable energy sources.

“Renewable technologies such as airsource heat pumps can be more easily retrofitted to existing properties. This is critical, as by 2050 we will still be living in the properties that have already been standing for years. In fact, today’s housing stock will comprise 70% of the housing stock of 2050. That would make it sheer lunacy to abandon the radiator as the standard heat emitter in the UK’s homes.”

Plumb Center’s managing director, Keith Jones, responded to the Spending Review as a welcome and positive step in terms of the green agenda. “Mr Osborne has pledged £860m funding for the RHI which will drive a more-than-tenfold increase of renewable heat over the coming decade, shifting renewable heat from a fringe industry firmly into the mainstream.

“The Chancellor has also confirmed that the Department for Energy and Climate Change will work with the private sector, enabling households to improve the energy efficiency of their house at no upfront cost, repaying through the savings they make on their energy bills, through the Green Deal. “The industry has started to make real progress with renewable technologies and this funding will be the catalyst needed to take it to the next level.

“It is now more important than ever that businesses such as Plumb Center recognise that it has an essential role to play in supporting installers with the provision of energy-saving technologies to homeowners. “We are currently undertaking a programme to create a new generation of branches with training facilities and full working displays of renewable technologies showcasing the latest and most innovative products,” Mr Jones said.

Insulation supplier Superglass was also encouraged by the Review. Sales and marketing director Michael Beard said: “In addition to the recent announcements by the Scottish Government launching the second phase of its Home Insulation Scheme and the UK Government’s Green Deal to overhaul the energy efficiency of homes and small businesses, we’re pleased to see further support in the form of £860m of additional funding to support households and businesses investing in renewable heat measures.

“We would encourage both the UK and Scottish Governments to continue to demonstrate their commitment to meet the UK’s energy efficiency targets by ensuring that the deadlines set are adhered to.

“Not only do these schemes enable consumers and businesses to become more energy and cost-efficient, they provide a substantial boost to UK manufacturing and employment.”

The Department of Transport has faired particularly well with a capital budget of £30.8bn. This is more than was invested during the past four years and will enable major projects such as Crossrail Birmingham New Street station to go ahead.

Overall, government investment is still being cut back, from £59bn this year to £47bn by 2014-15, although the Government is looking to the private sector and private finance to pick up some of the slack, according to research from Glenigan. Social housing sector faces the sharpest fall in capital funding – a 71% fall over the next three years.

However, the Government still plans to build 150 000 new homes and to press on with the Decent Homes programme by freeing up rental controls and allowing social landlords to privately fund investments. Michael Ankers, chief executive of the Construction Products Association, said: “We knew this was going to be a difficult Spending Review as far as construction was concerned. However, the Chancellor has acknowledged the role that capital spending on construction can play in helping to provide for a private sector-led economic recovery. In particular, maintaining transport investment at £30bn over the next four years will sustain employment and help encourage private sector investment.”

“Public sector investment in construction over the next four years will be £20bn less than in the last four years and that will have significant consequences for the construction industry.

Chris Edwards: There are already excellent products that have been tried-and-tested

“We hope that there will be a recovery in confidence in the private sector now that the uncertainty surrounding the Spending Review is out of the way. A commitment to Crossrail ends speculation about the long-term prospects for that scheme. We welcome the support for the Renewable Heat Incentive as a contribution to improving the energy efficiency of our existing building stock.

“Where we urgently need greater clarity, is in the mechanism to encourage investment in private housing and this will not happen until we have agreement over the New Homes Bonus Incentive and reforms to the planning system.”

Kathryn Hiddleston, construction partner at business and financial advisors, Grant Thornton UK, said “On a positive note, the Government intends to increase the existing levels of capital spend by £2.3bn a year to 2014-15 to fund projects with long-term economic value. This includes over £10bn on nationwide high value transport maintenance and investment and more than £14bn for Network Rail investment. This is good news for the large scale civil contractors.

“Changes to social housing so that new tenants will pay 80% of market rents will help fund the development of 150 000 of new social homes over the next four years. Welcome news for a beleaguered housebuilding market.

“Where the Government gives with one hand it can take away with the other. It wants to devolve significant financial control to local authorities and – despite pledging to maintain significant funding for schools and hospitals – it is requiring local government to achieve savings year-on-year of 7.5% over the next four years at the same time as freezing Council Tax for 2011-12. All this will undoubtedly have a draconian effect on the number and value of projects available for regional builders.

“We see the potential winners as the large scale civil contractors and social housing developers. The medium- to-small regional outfit may find that competition becomes even more keen for an ever-decreasing share of local council spend.”

According to Richard Parker, head of housing at PricewaterhouseCoopers: The cuts in social housing actually only take us back to the 2004-2007 spending levels. The challenge facing the Government now is how best to work housing grants harder, so they can continue to maintain supply at a reasonable level – particularly when there will also be less cross subsidy from outright sales and planning gain.

“The Government is committed to building 150 000 affordable homes over the next four years. This equates to 37 500 new homes a year – which should be achievable if the Government can better align the £4bn of grant funding to other capital contributions, including public sector land.

“The Government will also get ‘more for less’ if grant is used to support shared ownership and intermediate housing which require a lower capital subsidy. Rent increases for new tenants will increase the sums available to invest in new homes. The Government needs to be alert to the fact that 65% of tenants in social housing are on benefits. So, new tenants need to be better off than today’s, otherwise rent increases will only add to the benefits bill.”

 

This article first appeared in the November 2010 edition of Builders' Merchants News.

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