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The Pre-Budget: What it means for the construction sector

Chancellor Alistair Darling has cut VAT and taken UK borrowing to record levels, but what measures will actually affect the construction sector?

Capital spending on construction projects

Alistair Darling revealed £3 billion worth of public spending will be brought forward 2010/11 injecting stimulus into the rapidly weakening construction sector. Within the planned areas for capital spending, the social house building package to support an additional 2,000 homes. There are also moves to improve infrastructure. Upgrading flood defences for 27,000 homes to the tune of £20million and modernising school infrastructure using £800 million.

Small business relief

A special £2 billion loan guarantee scheme will see the Government underwrite 75 per cent of the risk when banks lend to small firms and Revenue and Customs has been ordered to give small firms extra time to pay their tax bills. The decision to amend the Empty Property Rate Relief for lower value properties will help small businesses in difficulty.

Job creation and insulating homes

Additional funding for insulation will help reduce carbon emissions from homes and provide a job boost for the construction industry. Insulating cavity walls and lofts is a cost effective way for the government to reduce carbon emissions.

VAT reduction

The reduction in VAT to 15% could have a beneficial effect to the economy and may lower product prices.

First time buyer saving scheme

Government will create a tax relieved savings scheme to help first time buyers save for a deposit. This scheme should use the existing ISA structure allowing use of the full £7,200 limited and supported by an additional Government contribution. And should help get the housing marketing moving

Mortgage availability/Crosby

The key recommendation to be taken up by the Government from Sir James Crosby's report on housing finance is that the Government should support the mortgage market by providing guarantees on the interest and principal of residential mortgage-backed securities (RMBS) or covered bonds backed by lending for new housing transactions. Ultimately, this move should increase funding available for new borrowers which, in turn, could inject some much-needed activity back into the housing markets.

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Related Pre-budget news:

Public spending sees huge boost

Construction industry reaction

Construction product prices to fall after VAT cuts

Public borrowing to reach record highs

Darling to create 10,000 jobs insulating homes

Darling demands banks back small businesses