Reaction to Chancellor's Spring Budget continues

Reaction from industry leaders to yesterday’s Spring Budget continues to flood in.

Yesterday, Infrastructure Intelligence reported comments from the Association for Consultancy and Engineering (ACE), Atkins, AECOM, Gleeds, Accelar and the Nature Finance Impact Hub, and others.

But mixed reactions from the world of infrastructure to Chancellor Jeremy Hunt’s Spring Budget are continuing to reach us, on the back of a plethora of opportunities and challenges for the sector in light of yesterday’s announcements. 

Kate Kenny, Jacobs people & places solutions senior vice president Europe praised the Chancellor’s recognition of the “triple challenge” of energy security, affordability and decarbonisation. 

“It was encouraging to see the Government commit to future energy needs through the launch of Great British Nuclear, classifying nuclear power as environmentally sustainable in our green taxonomy subject to consultation, and accelerating energy infrastructure innovation through £20bn of investment into CCUS,” she said.

“As important is the pledge to deliver 12 new investment zones and support local regeneration investment and sustainable transport infrastructure. 

“Ultimately, these long-term investments require agile, integrated and digitally enabled approaches, which will help unlock total value and deliver better outcomes that balance all our societal, environmental and economic needs.”

Mark Robinson, group chief executive at SCAPE, one of the UK’s leading public sector procurement authorities, issued a cautionary note, with local authorities also being told to "strengthen their existing budgets and, in some cases, manage real-term cuts". 

“Public sector investment in infrastructure has been a major driver of growth and community change post-Covid, and the concern is that any long-term reduction in local spending has the potential to limit the positive effects of ongoing regeneration plans," he said.

“To this end, the further devolution of powers to the combined authorities in Greater Manchester and the West Midlands is a significant takeaway for the construction industry. 

"Having greater say over local transport, skills and housing will ultimately lead to more focused spending, which can only benefit investment in local communities – be that infrastructure-led or otherwise. We hope this sets a precedent to be swiftly followed in future Budgets.”

Similarly, Zoe Billingham, IPPR North's director, cautioned that while the chancellor has "hinted" he understands that regional growth is key to national growth, he "fell short of truly ambitious action to shift the dial on regional inequality".

“The historic trailblazer devolution deals in Greater Manchester and the West Midlands and an intention that others will follow are a huge step forward in empowering local leaders and communities," said Billingham. 

"Through these, the chancellor could set the country on a path to an upgraded form of English devolution to unleash the potential of their areas.

“12 re-shaped investment zones are an improvement on their predecessors, but Canary Wharf is a strange model for the chancellor to point to because Tower Hamlets, where Canary Wharf is based, has the highest rate of child poverty in the UK."

She added a "better model than that" was needed and noted Canary Wharf was supported by major transport and infrastructure investment – "something denied to the North".

“Four years on from the promise of levelling up, with an election looming, today’s Budget was the government’s last chance to go big on regional inequality," she said. 

"As inequalities widen and key promises like investment in rail in the North remain broken, today’s announcements are but a shuffle forward. 

"To speed up levelling up, we now need promises kept and ambitions to close inequalities raised even further.”

Stephen Cox, Stantec's director of economics and regeneration, said that while the investment and focus on levelling up the country was welcome, there needs to be a long-term emphasis placed on developing traditionally challenged areas, through strategic economic restructuring. 

"This means concerted and continued investment in these communities," he said. 

"We would welcome further detail around these policies.

“Given our experience supporting the development of research, education, and innovation projects across the UK, we know these innovation clusters could have an incredible impact on the communities they serve. Case-making and maximising the most promising schemes will be crucial for local authorities over the next period.”

Max Sugarman, chief executive of Intelligent Transport Systems UK (ITS UK), said the positive news on AI, science and technology would "support the UK’s ambitions to become a science superpower over the coming years". 

He added: "Transport can play a central role in this vision too - the UK is already home to a highly innovative intelligent transport sector, conservatively valued at £1.5bn, and with the potential to support £15bn in economic growth going forward.

“To unlock the full potential of the intelligent transport sector, the industry needs the right policy environment. 

"This means the introduction a Future Transport Bill that supports new technologies like autonomous vehicles, drones, remote driving and e-scooters." 

Sugarman also advocated "shifting to a dynamic national pay-as-you-drive scheme that incentivises low carbon travel" and the roll out of smart ticketing on the rail and bus network. 

The organisation also wants to see the opening up of data from the transport network and the better integration of different transport modes, with support for Mobility as a Service schemes.

Sugarman said: “Through investment in transport technology the UK can reduce carbon emissions, deliver more cost-effective capacity and improve safety, whilst also supporting a world-leading industry and the economic growth it provides.”

Brendan Sharkey, head of construction and real estate at MHA, also highlighted the lack of affordable housing as a significant issue, with a big disconnect between the what the sector needs and government policy.

“Housing is basic human necessity and wherever you look there is a shortage,” he says.

“The growing number of homeless people, the frenzy when accommodation is made available for renting and the increasing cost of renting all bear this out.

“All the major house builders are publicly saying they will build fewer houses this year than last year. 

“What we needed from the Chancellor was a stimulus for the housing market. Unless our housing stock increases significantly, the problem will only get worse.”

He added stamp duty reductions and tax relief on mortgage interest for first time buyers “would have really helped” but the budget did not address these issues at all.

He also called for the Government to act on the supply and the enforcement of Minimum Energy Efficiency Standards (MEES) to ensure accommodation remains lettable and said it was “hard to understand” the lack of incentives for retrofitting, such as VAT exemptions and grants and financial support such as soft loans. 

On a more positive note, he added: “Construction, like many sectors, is struggling to find the staff it needs so hopefully the proposals to increase employment and help the economically inactive back to work will bear fruit.” 

Patricia Moore, UK managing director of Turner & Townsend said that, in a Budget dedicated to growth, and with talk of industrial strategy, “we might have expected the construction sector to be more front and centre”. 

Specifically, she pointed to the labour supply shortage blocking growth in the sector and said that the easing of visa restrictions for construction workers was some comfort, but the Chancellor had omitted to mention these points in his speech in the chamber, despite lengthy discussions on growing the UK’s workforce.  

“We can perhaps see the centre of gravity moving away from construction under this government,” she said.

On a more positive note, Moore was pleased to see “clear pockets of targeted, strategic decision-making, such as with devolution”.  

“Putting regeneration, infrastructure, and housing powers in the hands of regional mayors will enable decisions to be made by those closest to the challenges that local economies face,” she said.  

“Today’s statement also recognises the UK’s relative strength and potential in green investment. In particular, the support offered to the nuclear sector through funding, the SMR competition, and the launch of coordinating body Great British Nuclear can set a good precedent for how the industry and government can work hand in hand to finance and deliver major and innovative new projects able to transform our economy and our climate.”

She also urged the Chancellor not to forget the central role that construction will need to play in delivering the growth he is seeking.

Emily Scoones, Ramboll’s UK head of digital innovation (Buildings) said it was exciting to see the Government’s investment in Artificial Intelligence (AI). 

“It will be particularly interesting to see how the work with the Intellectual Property Office pans out and whether that unlocks some of the commercial blockers that technology adoption faces in the industry,” she said, noting that AI has “great potential” in the industry.

She explained AI could be used to predict and improve decision-making around maintenance from real-time asset and people data and learn from this data to develop creative designs that meet the multiple (often contradicting) criteria to develop great designs and places. 

“It can also play a key role in helping us to assess, understand and map our existing infrastructure to ensure we re-use or retrofit materials and assets, a crucial component in meeting our sustainability agenda,” she added. 

“On construction sites and in design, AI can be used to optimise construction programmes and material delivery as well as identifying risk scenarios. 

“Overall, this investment is something the Architecture, Engineering and Construction industry should look to utilise to improve productivity and safety, as well as creating more sustainable and people-centric design.”

The Spring Budget provided some support for warehousing and logistics businesses, but it should have gone further, according to Clare Bottle, CEO of the UK Warehousing Association (UKWA).

“We welcome the Chancellor’s announcement of a replacement to the super deduction tax allowance – something we had lobbied for, on behalf of our members,” she said.  

“But the fact that nothing has been done to correct the unfairness of business rates is very disappointing.”

Bottle said it was “regrettable” the UKWA’s letter to the Chancellor on this key issue for the sector had been ignored.

“Prior to this latest set of fiscal measures, UKWA wrote to the Chancellor, highlighting the intrinsic unfairness of his planned hike in business rates for warehousing businesses from April 2023,” she said, explaining that the Government’s chosen antecedent valuation date of April 2021 was during national lockdown, when demand for warehousing space soared, pushing up property values disproportionately compared to other commercial property sectors. 

“Basing business rates on the extraordinary property values in April 2021 puts warehouses at a significant disadvantage,” she said. 

On a more positive note, Bottle said full expensing would support warehouses looking to invest in updating and improving their operations, “including the upfront investment of installing rooftop solar panels as part of their drive to save costs, improve energy resilience and decarbonise on their journey to net zero”.