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Budget 2012: Industry reaction in-depth

Industry leaders have been giving their reactions on all the announcements in today’s budget, with many welcoming the apparent priority status for infrastructure but calling for short-term clarity around construction work and spending. Here are some of the best views:

Atkins UK chief executive David Tonkin said: “If we want to see a short-term boost for the economy, the projects confirmed by the Chancellor, such as those planned to support growth in London and Manchester and the proposed further improvements to roads, railways, broadband and energy supplies have to be commissioned and delivered quickly and efficiently.

“In less than five years we have seen a significant area of east London transformed from an industrial wasteland into a world-class sporting venue for the London 2012 Games into what is one of the largest regeneration projects in Europe. This should serve as a benchmark for what we can achieve in terms of other major infrastructure projects across the UK in the future. Atkins and other British engineering companies are extremely well placed to design, plan and deliver these projects.”

EC Harris head of transportation Mark Prior said: “Policy makers have explored several options to address this capacity issue however they must now accept that the only sensible and realistic option is to press ahead with plans to build a third runway at Heathrow.

“The arguments are well researched and well founded - Heathrow offers a solution that can be delivered within a reasonable timeframe and at an affordable cost. A third runway that increases capacity at the airport will also enable them to reduce congestion and the flexibility required to help minimise noise pollution and associated carbon emissions.”

PwC partner global engineering and construction Jonathan Hook said it was a positive budget for business, highlighting the reduction in the corporation tax. However he suggested it could be noted more for what was not included, rather than what was - particularly the absence of an update on the new private finance initiative model, and scant detail on how UK pension funds might invest in infrastructure.

“The £2bn has just been announced and I thought we might have a bit more about where that money is going to come from. I was a bit disappointed that there was not a bit more there and on what is going to replace PFI. Almost for me, it was the stuff that wasn’t mentioned that was more interesting than what was.”

National Federation of Builders chief executive Julia Evans said the construction industry will be wanting to find out if the £20bn National Loan Guarantee Scheme fund is going to support SMEs in the industry.

She said: “Lending to the construction sector remains depressed and construction SMEs find themselves at the back even of the SME queue. We hope that the scheme succeeds in doing this, but see no indication that it will.

“It also amounts to a significant admission of failure on the government’s part. The reality is that the government has already introduced mechanisms such as Project Merlin and the Enterprise Finance Guarantee scheme, designed to encourage the banks to lend to viable businesses. These schemes should have met the needs of businesses had the banks delivered on them, but they failed.”

Electrical Contractors’ Association chief executive Steve Bratt said: “We hope the forthcoming National Planning Policy will simplify planning and cut red tape. Hopefully this will make it easier for developers to commission projects for energy, infrastructure and Housing, which are vital to kick-starting our economy.

“We look forward to the publication of this policy next week, particularly given it supports sustainable development. We hope this will provide valuable opportunities for the construction sector, and particularly electrical contractors, who are key to making our homes and buildings morecarbon and energy efficient.”

Lend Lease UK chief executive Dan Labbad said: “The priority now should be to bring more of the schemes in the National Infrastructure Plan forward as quickly as possible. Progress on delivering the pipeline is still too slow and there is not enough visibility on what schemes will be going out to tender and when.

“It is also essential that a successor to PFI is formulated quickly. Enabling major infrastructure projects which would otherwise be postponed or not built at all is a key area where decisive government action could make a significant difference.”

Construction Products Association chief executive, Michael Ankers, said the UK was ‘some way away’ from seeing any benefit from the steps being taken to bring private finance into future road building and awaiting detail on the proposed ‘revolutionary planning reforms’.

What we would have liked to see is some of the additional savings made on current spending reinvested in capital projects that will not only provide a more competitive business environment for all businesses, but also create jobs throughout the economy.

It was particularly disappointing that the government once again failed to do anything to encourage investment in improving the energy investment in buildings, and the Budget seems to have been developed in a vacuum as far as their claims to be the ‘greenest government ever’ are concerned.

Network Rail chief executive David Higgins said: “Today’s announcement of further funding for the initial stages of the Northern Hub is a welcome show of confidence in rail bringing benefits to passengers as well as driving economic growth. To realise the project’s total value of £4bn to the Northern economy and create between 20,000 and 30,000 new jobs, the final stages of funding will need to be supported in the rail budgets to be announced later this year.”

EC Harris head of public Graham Kean said he does not believe the growth forecast for the next three years of between 2 and 3 per cent each year will be reflective of the construction industry.

He added: “Actually, there was precious little news for most of us in our industry (the energy sector aside) – a touch disappointing when you consider the potential that construction has to delivering regeneration and growth.”

The Vinden Partnership managing director Peter Vinden said: “The property sector has long called for the introduction of Tax Increment Financing, which has successfully been employed in the US as a means of financing public-private partnerships and offers a way to fund regeneration projects and improvements to infrastructure in the UK – the £150m pledged today by George Osborne is a step in the right direction, as is the £270m set aside to expand the Growing Places Fund.

Davis Langdon head of residential Ben de Waal played down concerns the 2 per cent increase on stamp duty land tax would have a significant impact on the international investors fuelling the capital’s booming luxury market.

He acknowledged that some family homes which just breached the £2 million threshold could be hit, but overall said any impact on prime residential would be “marginal”.

“We welcome the move to tighten up the loopholes on stamp duty avoidance too,” he added

Construction union UCATT general secretary Steve Murphy said: “Today we saw the true colours of this government, tax cuts for the wealthiest while workers are facing an ever greater squeeze on their living standards. This is not about fairness this is all about privilege.”

This budget was bad news for construction. The government is the construction industry’s biggest client. The industry is crying out for significant government investment in new projects in order to help get construction workers back to work. All that the industry received today were a few additional crumbs.

Deloitte head of Infrastructure and capital programmes Nick Prior said that while little in the way of additional infrastructure spending was announced, the Budget showed the importance government is attaching to the UK’s infrastructure.

He added: “The concern is therefore that we are still debating the government’s aspirations and are no closer to getting the shovel in the ground.”

Bouygues’ subsidiary Warings’ finance director Alison Durkin said: “In my view this wasn’t a budget that was really focused on the construction industry. The only aspect that is really likely to impact on our business here is the reduction in corporation tax.

“As well as help our competitiveness and reduce costs in our business, the corporation tax cut will continue to attract overseas investment into the UK, which can only be good for the economy.

“The Chancellor made positive noises about planning and cutting red tape to encourage the swift passage of projects through the planning phases, which would clearly be welcome. It will be interesting to see the final proposals and whether they will actually make a real difference.”

Energy Networks Association chief executive David Smith, said: “We are very encouraged by the Chancellor’s positive words about the future role for gas today. This builds on the statement made by the Energy & Climate Change secretary on Monday. Clearly the message in our Redpoint report published over a year ago, which found that retaining gas within the energy mix out to 2050 could save up to £700bn, has been heeded.

“We now need to hear a similar commitment to the future role for gas in fuelling our homes and businesses. That is why we have commissioned Delta Energy & Environment to undertake a major study into domestic space heating.”

KPMG head of infrastructure Richard Threlfall said infrastructure remained at the top of the political agenda and that the big news was the deal with Manchester (see here).

[Manchester] will reclaim £30 million a year from the Treasury and reinvest it in further infrastructure development, which could include new roads or light rail extensions. Manchester is the first city to secure such a deal and can we confidently predict the UK’s other major cities rapidly forming a queue at the Treasury’s door.

WSP Environment & Energy director David Symons said that talk of scrapping the Carbon Reduction Commitment is premature and warned that the solar industry faces a £300m hit.

“Talk of scrapping CRC is premature since the government has already committed to consulting on simplification of the regulation, and announced a series of policy measures to achieve this last year. 

“However, if the government does want to go further, it could achieve similar, but much simpler outcomes, by increasing levies on energy use and creating a league table from the introduction of mandatory carbon reporting.”

“Deeper in the Budget statement, businesses will welcome the increased funding of capital allowances for water and energy saving equipment. The solar industry, however, faces a further £300m hit over the next five years as its capital allowances are restricted. This will make it harder for business to invest in renewables, because companies won’t be able to recoup their investment as quickly.

Aldersgate Group executive director Andrew Raingold said the Chancellor’s emphasis on reducing bureaucracy around the CRC Energy Efficiency Scheme is ‘critical’ but must not be at the expense of investment in energy savings.

Minimising costs will be vital but the associated economic benefits must also be taken into account as other countries pull ahead of the UK in the green economy race

A more effective regulatory regime [than the CRC Energy Efficiency Scheme] would help ensure that businesses reduce both their energy use and bottom line costs.

Gleeds chairman Richard Steer said one of the ‘most heavily leaked budgets’ to date contained no real surprises.

We should welcome enhanced rail investment for the civil engineering sector and some promised help for housing. The cut in corporation tax looks good but he is still reducing tax allowances you get on purchasing plant, equipment and property so typical take with one hand and give with the other budget, also the allowance system is still horrendously complicated for those in business. Sadly there has once again been little or no real stimulus for the Green Economy. This was a missed opportunity.

Institution of Civil Engineers director general Nick Baveystock, said: “The Chancellor rightly reinforces the promises the Prime Minister set out on infrastructure earlier this week – to provide a more stable framework for potential investors to secure long term funding for our vital infrastructure networks, and ultimately translate the National Infrastructure Plan into clear outcomes that benefit the nation.    

“Progress in the development of new funding models such as Tax Increment Financing and the pilot for a new Earn Back Model is welcome, as is the news that a second group of pension investors have come forward with proposals for increasing investment in the construction phase of projects.

“But government should do more to improve the credibility of its aspirations by publishing an assessment of the level of funding it believes it can realistically secure from all categories of investors and a clear programme of work that will unlock these funds. This would boost investor confidence and encourage further investment.”

Tarmac chief executive Terry Last said the Budget was ‘good in parts’ but that measures announced for investment in infrastructure show that the government seems to understand its importance to UK plc.

Overall, this is a ‘firm hand on the tiller’ budget and not one of fundamental change. Yes, there are eye-catching moves such as the intention to reduce Corporation Tax to 20p after the next parliament, however at present this is just a good signal of intent. More needs to be done to help businesses, particularly in the hard-hit construction sector, now.

Scottish Building Federation chief executive Michael Levack criticised the Chancellor’s decision to ‘ignore’ the Scottish government’s plea to release funding for £300 million worth of shovel-ready infrastructure projects in Scotland.

The Scottish Government’s own estimate suggests that this investment could have supported more than 4,000 jobs across the Scottish economy. The value of construction output from infrastructure projects last year was around £1.3 billion or 12 per cent of total industry output. Subject to how quickly these projects could be rolled out, we believe this additional funding could potentially have boosted direct employment in the construction industry alone by up to almost 5,000 jobs.

There are some interesting ideas coming forward about leveraging private sector investment into road-building and other major infrastructure improvements in the future. But no sign in this budget of the immediate support the construction industry needs to get itself – and the wider economy – back on its feet.

Royal Institute of British Architects head of external affairs Anna Scott-Marshall said: “The 2012 Budget underlines the importance of new development and infrastructure in kick-starting growth in the economy. City Deals, the introduction of TIF and the expansion of Enterprise Zones could equip cities with the necessary tools to help them develop and grow.

“Whilst the RIBA welcomes the additional funding for the Get Britain Building scheme, we urge the Government to ensure that developers and developments selected for funding meet the highest quality credentials so homebuyers benefit as well as house builders. We look forward to seeing the details of the NPPF when it is published and comes into force next week”

Federation of Master Builders chief executive Brian Berry said the Chancellor could have done more to increase the number of new homes and support key policy initiatives such as the Green Deal.

The Chancellor made some welcome announcements in today’s Budget designed to help businesses hire people, such as the additional cut in corporation tax. However, construction SMEs need measures to reverse the contraction in the housing sector output before they can increase employment opportunities.

Homeowners and landlords need to know, just as much as the industry, what the total benefits will be of signing up for a Green Deal loan attached to their property.

Sadly, the Chancellor did not listen to those arguing for an extension to the Stamp Duty holiday for first time buyers. The reinstatement of Stamp Duty on properties worth over £125,000 for first time buyers will increase the numbers struggling to get on the property ladder.

It is pleasing to hear the government is sticking to its guns when it comes to the much needed planning reforms and we look forward to the detail next Tuesday.

Readers' comments (1)

  • It is a shame that Mr Osborne didn't scrap the empty property tax (aka the bombsite tax) in order to try and kick-start some speculative development.

    Emma Bridges, Director, Top Service Ltd (specialist credit reference and debt recovery agency).

    Unsuitable or offensive? Report this comment

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