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Budget 2018: 5 things the industry learned

There were plenty of announcements in the chancellor’s 2018 Budget that will have an impact on the construction industry.

CN has analysed the details behind the main announcements and picked out some of the business-critical takeaways you may have missed.

Roads

Among the almost £30bn of road spending announced was the £25.3bn allocation for the second Road Investment Strategy (RIS2), which will be delivered by Highways England between April 2020 and March 2025.

RIS2’s draft budget was expected as it prepares to replace RIS1, which has been running since April 2015 with a £15.2bn budget.

The proportions of this £25.3bn that will be spent on capital works and on operations will be decided when the final RIS2 plan is published in late 2019.

Earlier in the year Highways England chief executive Jim O’Sullivan told CN that as much as £4bn a year could be spent on capital works.

Some of RIS2’s could be re-allocated from Highways England to local authorities, the Department of Transport has said.

A further £3.5bn has been pumped into the National Roads Fund for spending on UK-wide and local major road schemes between 2020 and 2025, with all of this is being funded by vehicle excise duty.

Analysts at Peel Hunt said Balfour Beatty, Costain and Kier all stood to be significant beneficiaries from the planed road expenditure.

Local authorities have also been given an extra £420m to fix potholes and carry out other repairs this winter along with £150m to carry out minor works on local road junctions.

Generic housing Wates Living Space Erith Park development

Generic housing Wates Living Space Erith Park development

Housing

Help to Buy was not mentioned in the chancellor’s speech, but the Budget document revealed it would be extended by two years to 2023 – albeit restricted to first-time buyers purchasing properties up to newly stipulated maximum values that vary between regions.

Other announcements included an extra £500m for the Housing Infrastructure Fund to pay for upgrades on sites to make them viable for residential developments. This takes the total pot for the HIF to £5.5bn – and increases its target for new homes unlocked to 650,000.

The Treasury also launched a £650m partnership with nine housing associations that will run until 2021/22 and aim to deliver 13,000 homes.

Away from funding measures, the Letwin Review into landbanking was published yesterday and concluded that there was no evidence large housebuilders were engaging in the practice.

PFI/PF2

PFI and PF2 are dead.

Mr Hammond said he had never signed off a PFI/PF2 contract, and that he had now decided he never would, claiming they did not provide value for money or sufficient risk transfer from the public to the private sector.

Only two schemes, the A303 and Lower Thames Crossing, were being considered for PF2 procurement, so contractors should not see any material change to work pipelines.

The chancellor acknowledged however that half of the proposed £600bn infrastructure pipeline will be still financed and built by the private sector. It remains to be seen whether a brand new form of public-private partnership will be launched – or  whether the government will turn to existing models.

CITB training apprentice skills workers housing

CITB training apprentice skills workers housing

Apprenticeships

A £695m funding package was unveiled as part of the government’s efforts to train three million new apprentices during this parliament.

SMEs will see the amount they have to contribute towards training apprentices cut from 10 per cent of costs to 5 per cent. The government will provide up to £240m to cover the cost of this cut.

As announced earlier this month, the cap for how much large firms can pass on to suppliers to carry out apprentice training has increased from 10 to 25 per cent, with the government making £450m available for this.

The government will also provide £5m to identify gaps in the training provider market and to introduce new employer-designed apprenticeship standards.

Insolvencies

From April 2019 HMRC will be treated as a preferred creditor in insolvencies, giving it priority when it comes to recovering taxes collected by firms on behalf of the government.

Money from PAYE, employee national insurance contributions, construction industry scheme payments and VAT which is held in trusts will paid to HMRC ahead of unsecured creditors.

The government estimates the change will bring in £605m over its first five years to March 2024.

What you might have missed

Northern Powerhouse Rail will get £37m and East West Rail will receive £20m for both bodies to continue developing their plans for rail expansion and upgrades.

Construction is one of the industries where new distributed ledger technology, such as blockchain, will be trailed in field tests by technology agency Digital Catapult.

Meanwhile a new £170m prison in Leicestershire will be funded by the government, with Interserve having already been appointed to deliver the facility.

The National Living Wage will also be increased by 4.6 per cent from April, which could have a significant impact on costs for contractors with soft facilities management services such as cleaning and security.

In its last annual report Interserve said a rise in the national living wage had added cut operating profit for its services business.

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