The Construction Industry Reacts To The Chancellors Spending Review

Housebuilders broadly welcomed Chancellor George Osborne’s announcements to boost housebuilding in today’s Spending Review.

The Chancellor’s Spending Review and Autumn Statement today elicited a flurry of rapid-fire initial reactions from across the industry, with a mix of positive and critical responses.

“The Government is clearly committed to increasing both housing supply and home ownership,” said Stewart Baseley, executive chairman of the Home Builders Federation. Measures implemented in recent years have resulted in a significant increase in house building levels, but the magnitude of the challenge necessitates additional action to close the demand-supply gap.

The Chancellor’s announcements today will provide additional impetus to increase housing supply. “The industry has been working hard to increase its capacity to the point where it can deliver the much-needed increases in housing supply.” Over the last two years, the industry has embarked on a massive recruitment and training drive, hiring tens of thousands of new employees in order to achieve the 30% increase in output seen during that time.

The announcement made today could result in the creation of thousands of new jobs and apprenticeships in the sector. “By increasing home ownership and creating additional actual demand for new homes, builders can invest in the people, land, and materials needed to speed up supply.”

Builders will build if buyers can buy. “Further planning system reforms to increase the supply of smaller sites, ensure local plans deliver, and increase the rate at which planning permissions are processed – as well as releasing more public land – would be a huge step towards speeding up the rate at which builders can build,” he added. Building more high-quality homes will provide more people of all ages with access to their own home while also strengthening existing communities through improved infrastructure and amenities.

Building more homes will also help the UK economy by creating jobs and benefiting local economies across the country.” “A push toward affordable home ownership should not come at the expense of affordable homes for rent,” said Jeremy Blackburn, RICS Head of Policy.

If cities like London are to thrive, we must ensure that housing is available for all of its workforce – home ownership only goes so far, and even shared ownership may prove prohibitively expensive for some. “Government must fire up councils, public bodies, and housing associations to build across all residential sectors in order to deliver the functioning housing market that we need – and deserve – as a society,” we say.

“George Osborne is essentially subsidising one sector of the housing market over all others in an area that already receives substantial government funding.” Although the announcement appears to be encouraging for certain industries, the devil will be in the details.”

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The Brick Development Association (BDA) also welcomed the announcement that the government will invest £7 billion in 400,000 new homes. “We are pleased by the provision of £7 billion for new homes,” said Simon Hay, CEO of the Brick Development Association. The emphasis must now be on translating housing promises into on-the-ground project delivery.

“We are excited to contribute to addressing the chronic housing shortage that has developed in recent decades.” The re-openings and development of new brick plants are already extremely encouraging signs of the sector’s revitalization. “We should take heart from the fact that new-build housing has risen to such an extent, and that it is expected to rise further over the next year as more attention is focused on the current housing situation.” This comes on the heels of the announcement last week by the Department for Communities and Local Government that the number of new homes built has increased by a quarter over the previous year.

The BDA also welcomes the new levy to fund 3 million apprenticeships, with the goal of assisting brick-related industries in attracting an increased number of apprentices and addressing the skills shortage gap.

Acting General Secretary of the Construction Union, UCATT, Brian Rye, was less optimistic, calling the House announcements a “short-term fix.”

“In Conservative Britain, those who have are getting a leg up, while for the rest, services we rely on to make life worth living are disappearing,” he said. The Chancellor is tearing at the fabric of society and doesn’t care about the long-term damage he causes.”

“On the surface, construction workers should be pleased that plans to boost housebuilding are being put in place,” Rye added. However, the government is focusing on the wrong aspect of the housing crisis. It is a short-term fix that will exacerbate the long-term crisis.

“The government’s starter home policy and the development of so-called affordable homes to buy only help people who are on the verge of entering the housing market.” They are throwing families who are unable to get on the housing ladder to the wolves by reducing the opportunity to build homes for social rent.”

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The creation of a dedicated permanent pothole fund was welcomed by Matthew Pryor, managing director of Toppesfield, an independent road surfacing company: “It’s fantastic news that the government has decided to create a dedicated pothole fund.” For far too long, motorists have had to deal with deteriorating roads during the winter months, while cash-strapped councils tasked with repairing them have been working with one hand tied behind their backs. It is clear that the UK government recognises the importance of road infrastructure to the health of the economy.

The chancellor has put his money where his mouth is by funding the largest road investment programme since the 1970s to ensure that we have a road network that can support our ambitious growth plans.”

The FMB, on the other hand, has warned that a construction skills shortage could derail the Chancellor’s plan to build 400,000 new affordable homes.

“Faced with some difficult decisions regarding public spending cuts, today the Chancellor was right to ‘choose housing’ by prioritising investment in new affordable homes,” said Brian Berry, chief executive of the FMB. The government has confirmed plans to build 200,000 starter homes with 20% discounts for people under the age of 40, 135,000 shared ownership homes, 10,000 rent-to-buy homes, and 8,000 specialist properties for the elderly and disabled. This equates to a £7 billion public investment in new homes – a concerted effort to help aspirational home owners get on the housing ladder.”

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“However, ‘George the Builder’ will need a new generation of’real’ builders to make his vision for housing a reality,” Berry continued. We’re already seeing housing developments stall as the cost of hiring skilled tradespeople threatens to render some sites unviable.

There will not be enough hands to deliver more housing on this scale unless we see a massive increase in apprenticeship training in our industry. That is why we are urging the government to exercise caution when implementing the new proposed Apprenticeship Levy in the construction industry.”

“The Chancellor clearly recognises that the crisis of home ownership is inextricably linked to a crisis in house building,” Berry concluded. As a result, we hope that the government will do everything possible to increase housing capacity in order to address both issues. SME developers will play a critical role in delivering smaller-scale sites across the country.

The last time we built more than 200,000 homes in a single year was in the late 1980s, when small developers built two-thirds of all homes. SME house builders now only build slightly more than a quarter of all new homes, indicating another serious capacity issue – we need more small house builders to enter the market, as well as SME house builders to ramp up their delivery of new homes, in order to meet the Chancellor’s 400,000 new affordable homes target.”

KPMG’s head of infrastructure Building and Construction, Richard Threlfall, has welcomed the government’s commitment to infrastructure but is concerned about the capacity and skills for delivery. “Today’s Spending Review is good news for infrastructure,” he said.

The government has prioritised capital spending once more, putting significant funds behind its commitments to HS2, the Northern Powerhouse, and London transportation. “However, this is tempered by a 37% cut in the Department of Transport’s operating budget, which undoubtedly raises concerns about the Department’s ability to move its substantial pipeline of projects forward.” There is also a significant inconsistency between the slick sound bite of devolution revolution and the reality that it is still the central government that signs the big cheques and decides which schemes to support.

“We will see true devolution of power and the ability of the UK’s major cities to plan and deliver long-term infrastructure investment programmes only when the Government transfers material control over tax revenue from the Treasury to the regions.”

Patricia Moore, UK managing director of infrastructure at global construction consultancy Turner & Townsend, was mostly positive about the announcement, but cautioned that it was not a blank check and that the storey would be different for those working in the industry on the ground.

She said: “To make a large injection into Britain’s strategic infrastructure in the face of cuts elsewhere like in the plant hire industry, is a bet on the power of infrastructure to drive broader economic growth.

“However, this is not a blank check. The Chancellor has thrown down the gauntlet to the infrastructure industry, with a 37 percent cut in the Department of Transport’s day-to-day spending to match a large increase in capital spending. While funding for high-profile new projects such as Crossrail 2 and HS3 is welcome, it will be a different storey for those responsible for maintaining and upgrading Britain’s existing rail and road networks.

“The chasm between rising capital and declining operational spending raises the stakes for the infrastructure industry.” On a daily basis, it will have to do more with less.

“However, with UK infrastructure already enjoying a global reputation for excellence, the challenge now is for it to deliver both domestic growth and continue to serve as a beacon for UK Plc abroad.”

Returning to the housing crisis, CIOB policy officer David Hawkes stated, “The supply-side focus to alleviate the housing crisis is welcome and long overdue.” While the private home ownership market is responsible for much of the current shortfall in UK housing supply, greater consideration should be given to expanding the housing association, local authority, and affordable build-to-rent sectors, as well as the provision of accessible, high-quality homes for the disabled and elderly.

The announcement of some support for these tenures is a start, but it must be recognised that increasing supply across the entire range of tenures smoothes out demand instabilities and gives house builders and their supply chains confidence to invest.

The Government appears to have warmed to the importance of capital spending, which underpins both growth and productivity, with the £120 billion commitment announced for supporting infrastructure projects.

However, we need to see a longer-term demand model in place to support even more investment from both the UK and abroad in the future.”

Recognizing the magnitude of the housing shortage, the CIOB supports the measures outlined in the Spending Review and Autumn Statement 2015. However, we emphasise that new homes must not be subpar in terms of construction quality, and we do not believe that the desired level of housing or infrastructure can be achieved without first addressing the skills gap that currently exists in the construction sector.

There is a need for an average of 100,000 new recruits across the built environment per year between now and 2022 so greater support for Further Education institutions is needed, alongside recognition of the value of high quality apprenticeships and training.   “Although we welcome the news of a further 3 million apprenticeship starts by 2020, shifting the emphasis on firms to train their own staff, the Government must work closely alongside professional bodies and employers to design and implement high quality, robust standards that meet the needs of the construction industry. Furthermore, clarity on the role of the CITB moving forward must be made to give confidence to employers.”

“A pipeline is no good if it is just a pipe dream,” Kristy Duane, partner and head of infrastructure at Nabarro, added simply. Real opportunities with a clear path to completion are required for investment.”

While Jon Over, managing director of Goldstone Homes, a construction company based in the South East, maintained the positive sentiment, he was aware that the announcements could have a significant impact on planning departments.
“Today’s autumn statement was very positive for the construction industry, but it will put huge additional pressure on already overstretched planning departments, causing backlogs and time delays,” he said. The demand for real estate is undeniably high, but land availability will be a challenge.”

“As one of the contractors appointed to the Education Funding Agency (EFA) Regional Contractors Framework and having constructed two UTCs, any investment into the development of education facilities is good news,” said John Wilson, managing director at Preston-based Eric Wright Construction.

We completed four education projects in 2015 and are currently working on eight more, indicating that this is a sector in which we will continue to invest in 2016.

“We know that there is a high demand for primary facilities, with 1,600 schools and 11,000 classrooms needed over the next decade to accommodate Britain’s growing population, so there will undoubtedly be growth in this area as a result of the chancellor’s announcements.”

Last Updated on December 30, 2021

Indra-Gupta

Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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