The Construction Industry Reacts To The Chancellors Spending Review

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

The Chancellor’s Spending Review and Autumn Statement today has provoked a flurry of quickfire initial responses from across the industry, with a mix of positive and critical reaction.

Stewart Baseley, executive chairman of the Home Builders Federation said; “The Government is clearly committed to increasing both housing supply and home ownership. Measures introduced in recent years have led to a big increase in house building levels but the scale of the challenge requires further action to close the gap between demand and supply.

The Chancellor’s announcements today will provide extra impetus to deliver further increases in housing supply.   “The industry has been gearing up to boost its capacity to a level where it can deliver the increases in housing supply that are so desperately needed. Over the past two years the industry has initiated a huge recruitment and training drive, taking on tens of thousands of new staff to achieve the 30 per cent increase in output seen over that period.

Today’s announcement could lead to thousands of new jobs and apprenticeships created in the sector.   “Boosting home ownership and creating additional actual demand for new homes enables builders to invest in the people, land and materials necessary to accelerate supply.

If buyers can buy, builders will build.   He added: “Further reforms of the planning system to increase the supply of smaller sites, to ensure local plans deliver, and to 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.   “Building more high quality homes will give more people of all ages access to their own home, and boost existing communities by providing improved infrastructure and amenities.

Building more homes will also deliver a boost to the UKs economy, creating jobs and benefitting local economies in every area.”    Jeremy Blackburn, RICS Head of Policy, added: “A push towards affordable home ownership should not come at the expense of affordable homes for rent.

If cities such as London are to thrive, we need to ensure that housing can be provided for all of its workforce –  home ownership can only go so far and even shared ownership may prove too expensive for some.  We would like to see the Chancellor incentivise affordable homes for rent in both public and private sectors.   “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.

“George Osborne is essentially subsidising one sector of the housing market over all others, in an area that already benefits from significant Government funding.  Although the announcement is on the face of it encouraging for certain sectors, the devil will be in the detail.”

The Brick Development Association (BDA) also welcomed the news that the Government has committed to investing £7bn into 400,000 new homes.Simon Hay, CEO of the Brick Development Association said: “We are pleased by the provision of £7bn for new homes. The focus now must be on turning housing promises into on-the-ground project delivery.

“We look forward making our contribution to addressing the chronic housing shortage that has built up over recent decades. The re-openings and development of new brick plants are already incredibly positive signs in the revitalisation of the housebuilding sector. “We should take positively from the news that new-build housing has risen by such an extent, and should continue to rise over the next year as more focus is directed towards the current housing situation.”  This follows the news that, in figures released last week by the Department for Communities and Local Government, the amount of new homes built has risen by a quarter on the previous year.

The BDA also welcomes the new levy to provide 3 million apprenticeships, and aims to support brick-related industries to attract an increased number of apprentices and help to address the skills shortage gap.

Brian Rye, acting general secretary of construction union, UCATT was less upbeat and called the house announcements ‘a short-term fix’

He said: “ In Conservative Britain those who have, are getting a leg up while for the rest, services we rely upon in order to make life worth living are disappearing. The Chancellor is slashing at the fabric of society and simply does not care about the long-term damage he creates”.

Rye added: “On the face of it construction workers should be pleased that plans are being put in place to boost housebuilding. However, the Government is targeting entirely the wrong part of the housing crisis. It is a short-term fix which will make the long-term crisis worse.

“The Government’s starter homes policy and the creation of so-called affordable homes to buy are only assisting people who are close to entering the housing market. By slashing the opportunity to build homes for social rent they are throwing families, unable to get on the housing ladder, to the wolves.”

Matthew Pryor, managing director of Toppesfield, an independent road surfacing company, welcomed the creation of a dedicated permanent pothole fund: “It’s fantastic news that the government has decided to create a dedicated pot hole fund. For too long motorists have had to contend with crumbling roads over the winter months and cash-strapped councils tasked with repairing them have been operating with one hand behind their backs. “It’s clear that the UK government has recognised that the UK’s road infrastructure is integral 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 in order to ensure we have a road network that meets our ambitious growth plans.”

However the FMB has warned that the construction skills shortage could scupper the Chancellor’s vision for 400,000 new affordable homes.

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

Berry continued: “Nevertheless, ‘George the Builder’ will need a new generation of ‘real’ builders to make his vision for housing a reality. We’re already seeing housing developments starting to stall because the cost of hiring skilled tradespeople is threatening to make some sites simply unviable.

Unless we see a massive uplift in apprenticeship training in our industry, there won’t be enough pairs of hands to deliver more housing on this scale. That’s why we’re keen for the Government to tread carefully when applying the new proposed Apprenticeship Levy to the construction industry.”

Berry concluded: “The Chancellor clearly recognises that the crisis of home ownership is inextricably linked to a crisis in house building. We therefore hope that in order to address both, the Government will do everything it can to increase house building capacity. SME developers will have an important role to play in delivering the smaller scale sites across the country.

The last time we built in excess of 200,000 homes in one year was in the late 1980s when two-thirds of all homes were built by small developers. SME house builders now only build little over one quarter of all new homes which points to another serious capacity issue – we need more small house builders to enter the market and also for SME house builders to crank up their delivery of new homes in order to build the Chancellors 400,000 new affordable homes.”

Richard Threlfall, KPMG’s head of infrastructure Building and Construction, has welcomed the governmen’t’s Commitment to infrastructure but has concerns over the capacity and skills for delivery He said: “Today’s Spending Review is good news for infrastructure.

The Government has again prioritised capital spending, and put serious money behind its commitments to HS2, the Northern Powerhouse and transport in London. “However, this is tempered by the 37% cut in the Department for Transport’s operating budget which surely raises concerns over the Department’s capacity to drive forward its substantial pipeline of projects. “There also remains a huge inconsistency between the slick sound bite of devolution revolution and the reality that it is central Government is still signing the big cheques and deciding which schemes it wants to support.

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

Patricia Moore, UK managing director of infrastructure at the global construction consultancy Turner & Townsend was mostly positive about the announcement, but warned this was no blank cheque and the story will be different for those on the ground in the industry.

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.

“But this is no blank cheque. The Chancellor has thrown down the gauntlet to the infrastructure industry – with the big increase in the Department of Transport’s capital budget being matched by a 37% cut in its day-to-day spending. “While the cash pledged to headline-grabbing new projects like Crossrail 2 and HS3 is welcome, it will be a different story for those charged with maintaining and upgrading Britain’s existing rail and road network.

“This gulf between rising capital spending and reduced operational spend raises the stakes for the infrastructure industry. Day-to-day it will have to do more with less.

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

Back to the housing crisis, and David Hawkes, CIOB policy officer, said: “The supply-side focus to alleviate the housing crisis is welcome and long overdue. While much of the current shortfall in UK housing supply is associated with the private home ownership market, greater consideration must be given to expand housing association, local authority and affordable build-to-rent sectors, alongside 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 full range of tenures smooths out demand instabilities and provides house builders and their supply chains with the confidence to invest.   “With the £120bn commitment that has been announced for supporting infrastructure projects, the Government appears to have warmed to the importance of capital spending, which underpins both growth and productivity.

However, we need to see a longer-term demand model to support even greater investment, from both the UK and abroad, going forward.   “The CIOB recognises the scale of the housing shortage and therefore supports the measures highlighted in the Spending Review and Autumn Statement 2015. However, we emphasise that new homes must not fall short on build quality and do not believe that either the desired level of housing or infrastructure will be achieved without first curtailing the skills gap that currently exists across 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.”

Kristy Duane, partner and head of infrastructure at Nabarro added simply: “A pipeline is no good, if it is just a pipe dream. Real opportunities that are seen through to completion are what is needed for investment.”

While Jon Over, managing director at Goldstone Homes – a construction company based in the South East, continued the positive sentiment, but did knowledge the announcements could impact planning departments hard.
He said: “Today’s autumn statement was very positive for the construction industry, however it’s going to put huge added pressure on already overstretched planning departments causing backlogs and time delays.  The demand for property is absolutely there but it’s the availability of land which is going to be the issue.”

Commenting on the education building announcements, John Wilson, managing director at Preston-headquartered Eric Wright Construction, said: “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.   “During 2015 we delivered four education projects and are currently working on a further eight schemes, so it’s definitely a sector we will continue to build on during 2016.

“We know that there’s big demand for primary facilities, with 1,600 schools and 11,000 classrooms required over the next decade to accommodate Britain’s growing population, so no doubt there will be growth in this area following the chancellor’s announcements.”

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