AUTUMN STATEMENT: What the construction industry said

Published:  06 December, 2012

UK: Yesterday's Autumn Statement should provide an injection of much-needed seasonal cheer for most SMEs.

The Forum of Private Business welcomed much of what was in yesterday's Autumn Statement, describing it as a helpful springboard for UK economic growth in 2013 and beyond.

The business lobby group welcomed a number of the schemes outlined by the Chancellor, such as a 10-fold increase in the Annual Investment Allowance, a 25% increase in the budget of UK Trade and Investment to promote exporting and the outright cancellation of January's planned fuel duty rise.

"A 3p rise in January would have been economic vandalism in the current climate," said Phil Orford, the Forum's chief executive.

"Fuel prices have reached a cliff edge and the Chancellor has acknowledged this with yesterday's announcement. He has also heeded the overwhelming objections from small businesses that high fuel prices are hampering their own growth ambitions on a number of levels.

"We had urged the Treasury to commit to the concept of a fuel duty stabiliser by the end of the current Parliament, so what we have here is temporary relief instead of a serious policy change with real lasting benefits, but we can't see many businesses bemoaning that just yet."

The Forum also pointed to more good news for SMEs in the shape of an extension to Small Business Rate Relief, and a 10-fold increase to Annual Investment Allowance up to £250 000.

"We wait to hear more on the Business Bank and how much of the Heseltine Review the Government will be taking seriously this spring."

Jonathan Hook, Construction Leader at PwC, commented: "This Statement appears to be positive for the construction sector. While the successor plan to PFI is welcome, it is what the industry needed a year ago.

"The more important news for an ailing construction sector is the spend on roads, schools and local infrastructure including social housing. Many of these schemes can make a positive difference to the sector in 2013."

Construction activity remains a key plank in the Government's growth strategy according to the Chancellor, said the Construction Products Association.

CPA chief executive Diana Montgomery added that the Chancellor also recognised the need to divert current expenditure savings into capital investment and announced an additional £5bn investment over three years. "However, there is little evidence that this will have much impact, as the industry is currently contracting by more than double that amount every year.

"The Chancellor recognises the need to stimulate growth through construction activity and has made several announcements that are a step in the right direction. However, if you put these announcements into context, the benefits to our sector are less clear. Throughout this year, construction has been contracting by £1bn each month, so his announcement that there will be an additional £5bn added to the capital budget over three years, will do very little to offset the losses we are already experiencing, especially as that £5bn is not just for construction but includes IT, exports and skills," Ms Montgomery stated.

"Although the Autumn Statement included a number of re-announcements we welcome the emphasis on road maintenance and repair which will benefit from £725m from April next year. This was something we called for in our letter to the Chancellor last month and we are pleased he has heeded our request."

The National Federation of Builders gave a cautious welcome to some of the measures announced yesterday. "The construction industry is forecast to see growth in 2014. This will likely be a result of the recent government investments in infrastructure, planning and housing which will have started to yield benefits by that time," said chief executive Julia Evans.

"However, the UK economy will continue to experience austerity until 2018. The Government will create a business bank that will make it easier for SMEs to access finance.

"The proposed £1bn business bank would suggest an improvement on previous initiatives as lending to construction firms continues to fall.

"The NFB welcomes the adoption of ambitious plans to beef up the role and the resources of LEPs and begin to channel business support funding through them. Reducing the number of different funding streams leads to greater clarity and reduces bureaucratic overheads. The construction sector is pivotal to achieving the robust regional growth and job creation which are the goals of all LEPs and the sector needs to play a greater role in driving forward the success of LEPs."

"The Chancellor announced an additional £980m to fund 100 new academies and free schools and expand good schools in areas with the greatest pressure on places.

"An additional £270m of capital investment to improve buildings and facilities in further education colleges in England was also announced. It will be a cost-effective way of stimulating economic activity and regional economies. Moreover, investment in education is an investment in our future international competitiveness. On both fronts, this puts us on a much stronger footing for the future."

"The Government will provide an extra £300m for the Affordable Homes programme to provide 15 000 affordable homes and bring 5000 empty homes back into use. Ms Evans said: "This additional funding will provide a welcome boost for the repair, maintenance and improvement sector. For every home that is built, there is potential for the creation of two additional jobs in refurbishment. This is a good use of money that generates jobs, keeps buildings in use and addresses the shortage of housing."

Simon Rubinsohn, RICS chief economist, reported that his members were "delighted that the Government has acted on our recommendations and extended the empty property rate exemption for newbuild commercial premises from October next year. This will help take the break off speculative development, provide a badly needed boost to the wider economy and help to repair our struggling high streets.

"While the Local Employment Partnerships single fund and small business bank are very welcome, this money needs to be targeted at regional level by LEPs to deliver growth. LEPs need to prioritise construction and infrastructure.

"We are also pleased that the Government has set aside an additional £5bn investment to assist badly needed 'shovel-ready' infrastructure development across the UK, particularly in areas of the country outside of the South East.

"The pressure is on to make delivery happen and the Government acknowledges the key role that construction can play in wider economic recovery. More development means more housing, more jobs and better infrastructure."

Liz Peace, chief executive of the British Property Federation welcomed the announcement that from next October all newly-built commercial property completed between 1 October 2013 and 30 September 2016 will be free from empty property rates for the first 18 months, up to the state aids limit.

"The Government is rightly desperate to get Britain building again. Introducing a grace period for empty property rates for new development will remove a millstone from around neck of the property industry, and let it get on with what it does best - investing in our towns and cities, regenerating communities and building the offices, factories and shops in which we work. However, we urge ministers to look further at how this tax on business failure continues to act as a drag on economic growth."

Scottish Building Federation chief executive Michael Levack said: "The redirection of additional public funds towards capital investment is hugely welcome, particularly at a time when the construction industry continues to suffer reduced output and weak confidence.

"But, the release of these funds places an even greater onus on policy-makers to implement urgent reforms to our constipated public procurement system so this money can put more shovels in the ground as soon as possible.

"The Chancellor could have given a much greater boost to smaller building companies if he had cut VAT on building repairs and improvements as the industry has campaigned for him to do. Yesterday's Autumn Statement is another missed opportunity for more radical action to get the building industry back on its feet."

Construction industry insight provider, Glenigan, had this to say: "The Government is to squeeze current spending, investing the released funds in new education, science and transport programmes. The Private Finance Initiative has also been re-launched as PF2, with education again being a prime beneficiary through the £2.4bn Priority School Building Programme.

"The official Office for Budget Responsibility forecast for weak economic growth in 2013 and 2014 indicates that the anticipated recovery in private sector construction activity will remain constrained over the next two years.

"The long-awaited relaunch of the Private Finance Initiative is welcome, but it is vital that delayed projects are now quickly brought to a financial close.

"The Government's decision to reallocate funds if projects have not selected a preferred bidder within 18 months may help to concentrate minds, but is an indictment on how long it has taken to deliver such projects to site in the past.

"The re-direction of £5bn of public sector efficiency savings towards infrastructure, science, further education and school projects can act as an important catalyst for wider economic growth if supported projects are quick to start on-site."

Glenigan concluded that: "The importance of prompt action is underlined by the official OBR forecasts for weak economic growth in 2013 and 2014, indicating that the anticipated recovery in private sector construction activity will remain constrained over the next two years.

Sue Foxley, head of research of property consultants and estate agents Cluttons, commented: "Business investment is a key driver of activity in the office and industrial markets and the announcement to increase capital allowances to £250 000 will boost confidence to invest.

"We would expect that this would generate greater confidence to expand and take new space as needed. With office rents flat or falling outside London we believe this to be a welcome boost for business and, over time, the market."

Malcolm Chumbley, Cluttons' head of UK development agency, Cluttons, said: "We welcome the continued support for first-time buyers and others at the lower end of the housing ladder in the mortgage incentive schemes Homebuy Direct, NewBuy and First Buy. These have generated an increase of 35% in the value of new mortgages to first-time buyers."

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