Autumn Budget: Labour commits £5bn to housebuilding

Chancellor of the exchequer Rachel Reeves has committed £5 billion of investment to housebuilding next year, in Labour’s first budget for 14 years.

Reeves opened the autumn budget by reminding the House of Commons that the ‘country voted for change’ following Labour’s win in the general election on 4 July.

The Chancellor promised to restore stability in the economy and to drive economic growth with the mantra “invest, invest, invest.”

Among plans to improve the economy for “working people” as well as plugging the ‘£22 billion black hole’ inherited from the previous government, Reeves outlined several points to improve infrastructure and “rebuild Britain”, here’s how it affects construction.

Key Points

Investment

• Capital investment to increase by £13 billion next year, to £131 billion — increased investment in local roads maintenance and local transport.
• Allocating £20.4 billion to R&D investment in 2025-26.

Housing

• Increasing total investment in housing supply to over £5 billion — £500 million injected into the current affordable homes programme, increasing it to £3.1 billion.
• Stamp duty surcharge, paid on second home purchases in England and Northern Ireland, to go up from 3 per cent to 5 per cent.
• The government is committed to improving building safety and accelerating
• £1 billion to accelerate remediation of unsafe housing in response to the Grenfell Tower report, including new investment to speed up remediation of social housing.

Public services

• School rebuilding programme to see £1.4 billion injection — £550 million increase this year.
• £100 million to be earmarked for 200 GP estate upgrades across England.
• £4 billion education spending to allow 100 project plans to begin next year to tackle ‘crumbling schools and college buildings’ in England.
• Capital fund investing raised £1.5 billion bringing it up to £3.1 billion, for repairs and upgrades across the NHS estate, among other improvements.

Infrastructure

• Fix an extra 1 million potholes per year, with an additional £500 million for local road maintenance in 2025-26.
• Extending HS2 to London Euston HS2 — 5.4-mile tunnel drive from Old Oak Common expected to cost around £1 billion .

Alex Vaughan, CEO at Costain, said: “This gives certainty and clarity for the UK’s largest and most complex infrastructure programme.

“Having the HS2 railway connected to Euston, in the heart of London, will be vital for the programme to deliver its many benefits, and will act as a catalyst for the regeneration of the Euston area.

“The UK needs to reset its relationship with infrastructure by committing to a ten or 20-year plan overseen by a dedicated Minister for Infrastructure.”

Businesses

• Extra £3 billion to support SMEs and the Build to Rent sector by expanding existing housing guarantee schemes.

Business taxes

• National Insurance contributions for employers to rise 15 per cent from 13.8 per cent on workers’ earnings above £5,000 from April, down from £9,100 currently.
• Employment Allowance to increase to £10,500 from £5,000, with the £100,000 cap to be removed.

Skills

• Establishment of Skills England to ensure a highly-trained workforce needed to deliver economic growth.
• £300 million for FE to ensure young people are developing the skills they need to succeed and transforming the Apprenticeship Levy into a Growth and Skills Levy through £40 million investment. 

Tanguy Guerer, Head of Preconstruction at Legendre UK, said: “Reeves’ announcement of an additional £300 million for further education and the recent establishment of Skills England, is a good start to bolstering the future workforce but we will wait to see how changes to the Apprenticeships Levy impact the sector. 

“We need to ensure the priority is investment in high quality apprenticeships and training, responding to the needs of the industry. 

“We also want to see easier pathways between universities and construction companies created – to attract and retain future talent. This will ensure the construction sector, and the country, has the necessary foundations for growth.”

Industry response

While some welcomed Labour’s budget, for some in the industry the budget offered mixed news for the construction sector.

Eddie Tuttle, director of policy, research and public affairs at CIOB, said: “Increased funding for new infrastructure is welcome – as is the continued emphasis put on housing – but higher taxes, like increased employer National Insurance contributions, are likely to increase financial strains on the SMEs that are so vital to the industry and its supply chain.  

“Nearly a fifth of UK SMEs operate in construction and the cyclical, boom-bust nature of the sector, as well as recent economic hardships, have created a difficult environment for these businesses.

“Increased tax rises without consistent monitoring of the impact they have on the health of crucial sectors, such as construction, run the risk of damaging the pivotal role SMEs play. 

“We urge ongoing government consultation with bodies like CIOB to monitor these impacts on the sector.”

Meanwhile Tom Allen, managing director at  interior specialist Signature London described Labour’s budget as ‘nothing but hot air for the construction industry.’

Allen said: “Construction’s omission in Labour’s new industrial strategy and now a series of measures that either ignore construction entirely or potentially suffocate firms already treading water in our sector.”

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