Industry leaders’ mixed response to Spring Budget

Chancellor Jeremy Hunt’s Spring Budget has been met with a mixed reaction from leading figures in infrastructure.

A plethora of potential significant infrastructure developments were announced, including a dozen "investment zones" that could become "12 Canary Wharfs".

Each Investment Zone will receive £80m of support over the next five years.

To be chosen, each area must identify a location where they can offer ‘a bold and imaginative partnership between local government and a university or research institute in a way that catalyses new innovation clusters’.

If successful, the areas will have access to £18m of support for a range of interventions, including skills, infrastructure, tax reliefs and business rates retention.

Hunt also pledged £400m for "levelling up partnerships" in areas like Redcar and Cleveland, Rochdale, Blackburn, Oldham, Mansfield, South Tyneside and Bassetlaw.

Over £200m for high quality, local regeneration projects across England was also announced, including the regeneration of Tipton town centre and the Marsden New Mills redevelopment scheme.

Meanwhile, £8.8bn was pledged over five years, in the next round of city region transport settlements, with support also given to new nuclear energy builds and carbon capture schemes.

On the face of it, this would appear to be a lot to welcome for the industry.

But a lack of guarantees on infrastructure spending was also duly noted and the Chancellor has also been accused of not going far enough on building Britain’s sustainable future or tackling regional inequality.

Stephen Marcos Jones, CEO of the Association for Consultancy and Engineering (ACE), said: “The Chancellor has today made a series of big financial calls for the year ahead, particularly with a view to dealing with inflation and driving economic growth. 

“In advance of the Budget, the ACE made clear that a clear focus on the green economy and infrastructure is vital to the UK’s economic and social recovery and should be essential elements of the statement. 

“The ACE Budget submission included a set of constructive proposals for transport, procurement, communities and levelling-up, net zero, innovation and future skills and training.”

He added the organisation knows “too well the importance of regional growth to overall UK growth”. 

“With that in mind, we welcome the announcement on the expanded devolution deals, but await to see how the new investment zones will be rolled out,” he said. 

“The relationship between these new zones and pre-existing clusters, and freeports, will need to be made clear so the sector can plan accordingly and deliver a joined-up approach that makes the most of available funding.”  

Jones added there were “very few surprises” with regards to climate, with many of the announcements focused on industrial clusters, and carbon capture. 

However, he added details on capital allowances are “significant and will be an important step in supporting net zero projects”.

“In the days leading to the Budget, we issued a warning that the UK’s reputation for delivering large-scale construction and infrastructure projects is on the line, following the decision to delay construction of significant aspects of HS2 by two years,” he added. 

“The focus on reducing inflation in today’s budget hopefully means a re-think to the delivery of major projects in the medium and long term.”

Colin Wood, chief executive of AECOM Europe and India said today’s Budget took “steps not strides” to reaching net zero and growing the economy sustainably – something it regards as two of the most important challenges of our time.

He added that for “UK plc” to thrive, the Chancellor needed to put new infrastructure at the heart of his plans for sustainable economic growth. 

“We think there’s much more to do and we are ready, with the advisory and expertise, to support the government in delivery.” 

Wood said today’s commitment to 12 Investment Zones with a focus on research and innovation was a “welcome start” to reaching net zero and growing the economy more sustainably and funding of £80 million over five years would enable these zones to “make some headway”. 

But he added the successful stimulation of business investment is critical.

“Infrastructure decisions made at a local level, particularly around transport, ensures outcomes better meet local needs, so confirmation of multi-year single settlements for Greater Manchester and the West Midlands is a step in the right direction,” he said.

“The £20 billion investment in Carbon Capture, Utilisation and Storage is an extremely exciting prospect for the sector and one which could achieve tangible positive change so we’re keen to see early progress. 

“The UK is well placed with its geology, appetite from investors and projects already in development. 

“AECOM has been working on developing CCUS projects for several years, steering them through the planning process. Likewise, we were pleased to see next steps announced in the progression of Small Modular Reactors.”

While AECOM would have liked to have seen a specific announcement to support building decarbonisation, Wood added full expensing for capital investment, including plant and machinery, would help with retrofit costs.

“As an employer of around 7,000 people in the UK, we also welcome the announcement to extend free childcare to children under three years of age,” he added. 

“In particular, we want to see more working parents being able to continue their careers without the pressure of high childcare costs.”

Richard Robinson, CEO, Atkins UK and Europe was pleased to see an ongoing focus on high quality infrastructure as a catalyst for growth.

He particularly noted “continued Levelling Up funding and progressing clean energy projects through the creation of GB Nuclear and a commitment to invest in developing new technology including Carbon Capture & Storage”.  

However, he added: “The government must now focus on two key enablers which will allow actual delivery on the ground, accelerate the net zero transition and improve productivity across the UK: streamlining the planning and consenting process; and providing a far clearer long-term view of investment priorities which will give businesses the direction needed to recruit, upskill and innovate with greater confidence. 

“As such, the much-delayed National Infrastructure & Construction Pipeline – which sets out the public and private investment that will transform people’s lives for decades to come - needs to be published as soon as possible, noting that it was last updated in 2021.”

Graham Harle, CEO of Gleeds, said there was an "admirable" and "welcomed" focus on long-term investment, but said long term aspirations were not short-term fixes.

"We wanted three things," he said. 

"Help to alleviate critical labour shortages, guarantees on infrastructure spending, and tax incentives to impact carbon reduction refurbishment of residential and commercial buildings. 

"What we got was promises of more enterprise zones, investment incentives for mini nuclear power projects and tax breaks for capital expenditure investment."  

He added there was a need for clear strategic vision from government to promote investment and grow confidence. 

"In spite of the claim that this was a Budget for growth, it was in fact a careful economic statement from a pressed Chancellor who had more headroom to invest, due to £30bn less borrowing costs, than he used," Harle said. 

"I am disappointed that there were no defined measures to assist us operating in the built environment, one of the largest and most impactful sectors in the UK.”  

Stefanie O’Gorman, director of sustainable economics at Ramboll said the "regeneration of our towns and cities" could impact positively on many lives and livelihoods. 

However, she cautioned there was a great need to ensure climate action, social value delivery and positive environmental outcomes were embedded in these investments. 

"The statement made little focus on the use of and opportunities for this investment to deliver a Just Transition," she said. 

"I urge the Government to ensure that the processes they put in place around the delivery of this funding allows delivery partners to maximise a wider range of benefits, using outcome-based and multi-year funding mechanisms. 

"These will enable local authorities and others to ensure that the solutions that are funded really deliver for the people in their communities and improve the places in a way which supports the Chancellor’s other goals around employment and enterprise.”

Chris Fry (FIOD), Co-founder of Accelar and the Nature Finance Impact Hub, said the Budget did not go far enough and was even "indifferent and silent" when it came to the drive towards net zero.

He welcomed the fact the announced Investment Zones must demonstrate support for net zero by 2050, the long-term targets for nature recovery and improved resilience to the effects of climate change. 

He also noted the inclusion of funding for building retrofits in the new trailblazer devolution deals for the West Midlands and Greater Manchester as a welcome development, along with the government’s commitment to up to £20bn funding for early deployment of Carbon Capture, Usage and Storage (CCUS). 

However, he added that given that many of the announcements in this Budget "take the UK well into the second half of the critical decade for the green transition" the Budget did not "convey the urgency nor breadth of coverage required to accelerate and embed the transition".  

"Perhaps one exception nicely illustrates this, that is how the investment in exascale supercomputer and new AI Research Resource starting this year will help to better understand climate change amongst other societal challenges," he said.

"Otherwise, most of the announcements are indifferent and silent towards the green transition and are therefore missing the chance to embed opportunities across the economy and society, and to compete globally.  

"We must await the government’s further announcements due by the end of March on meeting our net zero commitments, including in response to the Mission Zero report."

Meanwhile, civils contractors welcomed the announcement of the foundation of Great British Nuclear (GBN) and said that it must herald ‘a new era’ for the sector.

During the Budget, Hunt told Parliament that the government would launch the body to address constraints in the nuclear market and support new nuclear builds. 

As part of this, GBN will launch the first staged competition for Small Modular Reactors, due to be completed by the end of this year, and if the technology is demonstrated to be viable, will co-fund it in the UK.

Further large-scale nuclear projects will also be considered by GBN subject to value for money, relevant approvals and technology readiness.

Marie-Claude Hemming, director of operations for the Civil Engineering Contractors Association (CECA) said the announcement would "encourage private sector investment" and is "good news for industry".

“For too long the UK has been faced with an urgent need to establish the secure, net-zero energy sector we will need for the 21st century," she said. 

“CECA has consistently argued that new nuclear power must be part of the mixed portfolio of generation the country needs to keep the lights on and create a sustainable, low-carbon future.

“The foundation of Great British Nuclear must herald a new era in which the ambition of delivering new nuclear generation translates from words to action."

There will be more Spring Budget reaction on Infrastructure Intelligence tomorrow.