The construction industry’s reaction to announcements on housing and infrastructure in today’s 2013 Budget.
Richard Threlfall, KPMG’s head of infrastructure, building and construction said: :“The chancellor’s ‘Help to Buy’ scheme looks like the perfect “get out of jail” card. It’s a bold move, perhaps a desperate one, but one that will be undeniably welcome by the beleaguered construction industry.
“The government has finally recognised that housing might offer the fastest acting pain relief for our economic woes and, perhaps despairing of local authorities to be proactive in supporting new house building, has decided to focus stimulus on demand.
“By opening the scheme to all buyers of new-build houses up to £600,000 in value, the chancellor has thrown the UK house building industry a new lifeline. Ultimately, the construction industry and all trades that support construction of new houses in the UK will benefit from the new scheme.”
Richard Steer, chairman of Gleeds Worldwide: “My overriding feeling is one of great pessimism, I am afraid this budget has as much credibility as the ingredients list on supermarket Beef Lasagne. So many previous targets missed, so many previous incorrect forecasts and a limited infrastructure boost that looks good on paper but so did the £4.7 billion of capital expenditure promised in 2011 and the £5.5billion promised the year after that has yet to make an impact.
Brian Berry, chief executive of the FMB, says: “We needed a ‘Budget for Housing’ to address the acute shortage of affordable, energy-efficient homes in the UK. The Help to Buy package is aimed at stimulating the underperforming mortgage market, which could provide a boost to all firms involved in house building, renovation and repair. But changes to the FirstBuy scheme will be of limited assistance if it remains too costly and complex for smaller developers, who deliver a third of all new homes.”
Richard Hutchings, UK director at WSP said: “The incentives contained in today’s Budget for housing are a welcome boost to what is currently a dysfunctional market, and will hopefully give confidence to investors to build. The extension of the First Buy scheme, the money for build to rent and the Help to Buy initiative from 2014 will underpin the weak signs of recovery as repossessions are at a five year low, the number of first time buyers is rising for the first time in four years and affordability is improving.”
My overriding feeling is one of great pessimism, I am afraid this budget has as much credibility as the ingredients list on supermarket Beef Lasagne
Richard Steer, chairman of Gleeds Worldwide
Ben de Waal, Head of Residential, AECOM said: “The flip side [of Help to Buy] is the implication that the private rental sector is unlikely to receive significant political support. Is the Government in danger of setting a dangerous precedent of subsidy to fund home ownership. This is not sustainable in the long run so we come back to the need for a more diversified housing supply that embraces renting as acceptable rather than simply for the “can’t affords’. This budget has in many ways reinforced the negative stigma associated with renting at a time when the market for institutional grade, high quality service orientated housing is just beginning to take off. Poor timing.
“Disappointing that there was no mention of Local Authority debt caps being raised to help them fund new homes. Clearly the impact on the UK balance sheet is considered to be too great but it ignores that from a delivery point of view the Local Authorities are very well placed to fund a major programme of new housing on land already within their ownership.”
We’re particularly pleased our call for a focus on the short-term boost of housing has been heeded, alongside an increase in longer-term big ticket infrastructure spending. This was recognition it was a mistake to cut capital spending so sharply and that other growth-boosting measures were taking too long
CBI Director-General, John Cridland
Construction Equipment Association chief executive, Rob Oliver said: “The “Help to Buy” move is an imaginative one, but will take some time to stimulate the new build market. An allocation of resource to social housing may have been a better shorter term bet to help the housing sector, but that was politically something that was unlikely to happen.
Paula Higgins of the HomeOwners Alliance says: “While the equity loan scheme announced today will get some houses built, it won’t be enough. The Government should have considered a targeted Help to Build scheme, getting more houses in the right places and at the right price available on the open market, if they want to make a dent on the decades of chronic lack of house building.”
Peter Chapman, head of rating and compensation for Cluttons, expressed his disappointment that today’s Budget announcement did not address the pressing issue of business rates.
“This Budget provided the Chancellor with a golden opportunity to demonstrate that the government was listening to the retail industry’s pleas and it is disappointing business rates were not addressed.
“Instead, the government has refused to listen to the concerns of the retail industry which called for no increase to business rates next year. It has also stood by the annual uplift in the Uniform Business Rate (UBR) multiplier at the Retail Price Index figure of 2.6 per cent for 2013/14. It is unfortunate the government did not increase future years’ rates bills by no more than the Bank of England’s lower Consumer Price Index (CPI).
“Secondly, we are disappointed the government did not take the opportunity to expand the empty rates relief.
Stephen Ratcliffe, UKCG director said: “There is some good news for the industry notably, the increases announced in public sector infrastructure investment, new help and guarantees on mortgages and a commitment to publish a longer term investment pipeline (to 2021) covering the most economically valuable areas of the economy.
“But the extra spending on infrastructure will not start to bite until 2015. What the construction industry wanted most of all was more assurance that government is focussing on delivery of projects but there is little detail about for example what the Treasury guarantees (announced last summer) have achieved and how deal flow in the public sector pipeline will be speeded up.
“The promised review of Whitehall’s capability to deliver projects will bring no immediate changes.”
Atkins UK chief executive David Tonkin said: “The news that capital spending will now increase rather than fall as was planned is obviously extremely welcome. The pledge of up to £3 billion a year being found from 2015/2016 can be used to deliver real economic and social benefit through the building of new projects to support areas such schools, road building, rail and energy infrastructure.”
Jonathan Hook, PwC’s Engineering & Construction leader, said: “For construction, the big news for the sector is the chancellor’s bet on the housing market with the Help to Buy scheme. The commitment of £3.5billion to shared equity loans up to 20% coupled with £130 billion of mortgage guarantees is a big boost to the residential market.
The chancellor obviously believes [housing] is a quicker and cheaper way to get an economic boost than other areas of capital spend
Jonathan Hook, PwC’s Engineering & Construction leader
Deputy managing director at consultancy WSP Mark Naysmith: “I don’t think anyone in the industry was expecting any major announcements but on a positive note, the measures announced for house buyers will be a major boost for the sector and will hopefully give confidence to investors to build. However it’s disappointing to see the lack of detail behind the Chancellor’s commitments to infrastructure today and the delay with which it will materialise. What industry needs more than ever is clarity and assurance that the Government’s plans are being progressed.”
Nick Prior, head of infrastructure at Deloitte said: “Today’s commitment needs to be backed up by action and delivery. The fact remains that the construction sector has contracted in each month since October last year and new orders are down by nearly 40 per cent from their peak in 2007. This is despite many announcements and initiatives that have not been able to arrest this decline.
“If infrastructure is to be the silver bullet for economic recovery, we need to see shovels hitting the ground on projects that have a real impact in driving growth sooner rather than later.”
Four Budgets and two National Infrastructure Plans later, the Chancellor is still committed to using infrastructure to help the country build its way back to growth
Jon Poore, public sector director at Turner & Townsend
Jon Poore, public sector director at Turner & Townsend, said: “The script is well worn – improving Britain’s infrastructure will make us more competitive and give the economy a welcome stimulus.
“Mr Osborne’s promise of an extra £3 billion of public sector infrastructure investment per year from 2015/16 is eye-catching, but also an acknowledgement that his plan for the private sector to step into the breach is struggling. In the past year total infrastructure spending shrank by 12% as the private sector steadfastly refused to take on the role of white knight. Progress on the Chancellor’s wishlist of infrastructure projects has been underwhelming.”
Dr Nelson Ogunshakin OBE, industry co-chair of NIPSEF, said: “It has been a remarkable achievement to bring together all areas of the infrastructure industry. Delivering the National Infrastructure Plan requires the insight of both government and industry, from the delivery supply chain to the financiers of infrastructure, and from asset owners and managers to the representatives of business users of infrastructure. Industry is delighted to see this collective insight being formally recognised by the Chancellor of the Exchequer and is keen to assist government further in delivering the infrastructure so vital to the UK’s economic growth.”
Welcoming the announcement in today’s budget that the government is to consider the case for REITs being included within the definition of “institutional investor”, Peter Cosmetatos, director of finance at the British Property Federation, said:
“The announcement of an informal consultation on the potential inclusion of REITs in the “institutional investor” definition is very welcome, as this is something we have been asking for. If the Government can be persuaded to make this change, it will ensure that the UK REIT sector can get the greatest value from the “institutional investor” relaxation of the diverse ownership rule last year and the “REITs investing in REITs” rule change being made this year.
“Allowing REITs to be considered as ‘institutional investors’ will allow REITs to hold significant interests in other REITs, and use the REIT wrapper as a vehicle for attracting capital into joint venture arrangements.”