Chancellor Rishi Sunak took the House of Commons limelight once again yesterday to present the annual Spring Statement. The Spring Statement may be smaller than the Autumn Budget, but in a time of high inflation costs, numerous administrations and jumping energy costs, the construction sector was listening keenly.
Ahead of the Statement, the industry had urged Sunak to delay the red diesel ban, devise a better plan for rail, and draw up a home insulation plan that works.
But many were not impressed, with Clive Docwra, managing director at property and construction consultancy McBains, saying the Statement included “little direct help for the construction sector”.
Gleeds chief executive Graham Harle, meanwhile, warned that the promises amounted to “thin gruel for business”.
1. No last-minute reprieve for the red diesel rebate
Subcontractors especially had been hoping for one thing in particular – a delay to ending the red diesel rebate.
The government says ending the rebate, which provides construction with access to diesel at a cheaper rate, will push the industry to take up more renewable energy sources.
But construction companies say the sector is not ready to make the move and will just be forced to pay more for white diesel.
Last week, construction bodies wrote to Sunak and business secretary Kwasi Kwarteng in a last ditch attempt to postpone the ban for 12 months. They warned banning red diesel now would pile financial pressure on companies at the “worst time” and could prove to be “unbearable” for many businesses.
Earlier this week, CN editor Lem Bingley weighed in, writing: “Is it really sensible to set the cost quite so high, right at this moment, given all the other problems facing the industry at present?
“Surely the switch could be postponed for a short amount of time, allowing contractors more of an opportunity to prepare.”
And reacting to the Spring Statement itself, Federation of Master Builders (FMB) chief executive Brian Berry said: “This is precisely the wrong time to heighten costs for building projects, with an additional need for there to be greater alignment in ensuring that green alternatives, such as biofuels, are affordable and accessible for construction firms.”
While there was no postponement of the red diesel ban, Sunak did announce a temporary cut to fuel duty of 5p a litre.
2. Business rate exemptions for renewable energy generation
The announcement on business rate exemptions could be more promising for the industry.
If a business is using plant and machinery to generate renewable energy, they will be exempt from the business rate.
That had been promised back in the Autumn Budget last year, with it set to take effect in April 2023. It has now been brought forward and will take effect next month.
3. R&D tax relief reform
Research and development (R&D) also got a boost – within a sector where it is sometimes lacking. Tax reliefs for R&D will now be reformed, as promised, so that cloud and data costs could qualify for relief from April 2023.
“The government remains committed to refocus support towards innovation in the UK, ensuring that the UK more effectively captures the benefits of R&D funded by the reliefs,” the Statement document says.
Data is growing in importance in the construction sector, with specialist TClarke seeing technology work account for a quarter of its work last year.
4. Basic income tax to drop in April 2024
Looking ahead, Sunak announced that basic income tax would drop to 19p per pound from 20p per pound, but that this would only take place in April 2024. He said it would be “the first time in 16 years” that income tax is cut.
“That is equivalent to a £5bn tax cut for 30 million people across the UK,” Sunak told the House of Commons. “It is fully costed and fully paid for in the plans today.”
With costs rising across the sector, this could bring some much-needed relief to businesses up and down the country.
5. Extending VAT relief for green housing solutions
The chancellor did announce measures to promote decarbonisation of housing. One of the key measures was to slash VAT for green housing solutions, such as solar panels. Currently, it sits at 5 per cent.
Royal Institution of Chartered Surveyors (RICS) senior public affairs officer Bradley Tully said that retrofitting homes is a key part of the push for net-zero.
“Discounts for homeowners looking to support these ambitions have been a long time coming, so we’re delighted the chancellor has finally listened to our call and taken action to cut VAT for families to retrofit their homes and drive down carbon emissions,” he said.
“Looking at the wider economic picture – including rising inflation – this poses a significant pressure for businesses, and while the business rate cut being maintained will help our highstreets, it does fall short from the widescale reform that they need to flourish.”
But Ramboll market director for UK energy John Mullen said the Statement does not go far enough.
He said: “Home efficiency uptake has never reached the levels needed to meet net-zero, even with the current reduced VAT support. It is unlikely removing VAT will be enough to encourage the uptake needed, which requires practical support and targeted legislation.”
6. More to come on training later this year
Rishi Sunak did say he would announce further measures to improve apprenticeships and push skills development in the sector. Berry said the commitment was “encouraging”.
“Measures should focus on providing long-term solutions that incentivise more businesses to play their part in training the next generation of tradespeople,” Berry added.
Docwra said training schemes “could have done with a boost” now, rather than promises in the future.
“The most recent figures show the construction industry had 48,000 vacancies, the highest for 20 years, as a result of an ageing workforce, EU workers leaving since Brexit, and bureaucratic apprenticeship schemes,” he said. “But all we heard was that this will be tackled in the Autumn budget.”
