Industry broadly welcomes infrastructure focus in new chancellor’s growth plan

Industry broadly welcomes growth by new UK chancellor Kwasi Kwarteng, pictured, that describes infrastructure as an essential foundation for growth.

Leading industry organisations have broadly welcomed the UK government’s mini-budget, which described infrastructure as ‘an essential foundation for growth’.

New UK chancellor Kwasi Kwarteng outlined a raft of measures in his Growth Plan 2022, setting out specific infrastructure projects the government will prioritise for acceleration across transport, energy and digital infrastructure.

In addition, the government has said that it will move to tackle the UK’s “slow” and “fragmented” planning system to unleash the growth potential of investment in high quality infrastructure.

In 2021 it took 65% longer to get consent for major infrastructure projects than in 2012. Ministers say that new legislation will cut barriers and restrictions, making it quicker to plan and build new roads, speeding up the deployment of energy infrastructure like offshore wind farms and streamlining environmental assessments and regulations.

It was also confirmed that the government is in discussion with 38 local and mayoral combined authority areas in England including Tees Valley, South Yorkshire and West of England to set up Investment Zones in specific sites within their area. 

Each Investment Zone will offer generous, targeted and time limited tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development. 

And, for business’ worried about rising energy costs, a new Energy Bill Relief Scheme will reduce wholesale gas and electricity prices for all UK businesses, charities, and the public sector like schools and hospitals – something that ministers claim will provide a price guarantee equivalent to the one provided for households, for all businesses across the country.

And, in a clear focus on aiming for a continued growth rate of 2.5%, the proposed corporation tax rise to 25% has been cancelled, keeping it at 19%

The basic rate of income tax will be cut to 19% in April 2023 – one year earlier than planned – and the chancellor also abolished the additional rate of 45% higher income tax, taking effect from April 2023. In its place will be a single higher rate of income tax of 40%.

The 1.25% rise in National Insurance contributions has also been reversed, a change that ministers claim will save 920,000 businesses almost £10,000 on average next year. 

The chancellor also announced more relief for businesses by making the Annual Investment Allowance £1m permanently, rather than letting it return to £200,000 in March 2023. This gives 100% tax relief to businesses on their plant and machinery investments up to the higher £1m limit.

Speaking to the commons, Kwasi Kwarteng, chancellor of the exchequer, said: “An essential foundation of growth is infrastructure. The roads, railways, and networks that carry people, goods, and information all over our country. 

“Today, our planning system for major infrastructure is too slow and fragmented. The time it takes to get consent for nationally significant projects is getting slower, not quicker, while our international competitors forge ahead.

“We have to end this. We can announce that in the coming months, we will bring forward a new Bill to unpick the complex patchwork of planning restrictions and EU-derived laws that constrain our growth.

“We will streamline a whole host of assessments, appraisals, consultations, endless duplications, and regulations. We will also review the government’s business case process to speed up decision making.

“And today, we are publishing a list of infrastructure projects that will be prioritised for acceleration, in sectors like transport, energy, and telecoms. And, to increase housing supply and enable forthcoming planning reforms, we will also increase the disposal of surplus government land to build new homes.

“Mr Speaker, we are getting out of the way to get Britain building.”

Stephen Marcos Jones, CEO of the Association for Consultancy and Engineering (ACE), welcomed the positive steps on speeding up infrastructure projects. He said: “Ahead of the statement we called for an assured programme of projects from the public sector to drive growth and support jobs across the UK. This is why we were pleased to see positive steps announced on expediating 100 infrastructure projects and the establishment of new investment zones.

“While we await more detail of how the planning process will be simplified for significant infrastructure projects in forthcoming legislation, the announcement that 100 projects have been earmarked for construction to start by the end of 2023 will be welcomed by our members and the wider industry.

“The establishment of 38 investment zones is also encouraging. Building on the Freeports concept, they will help to stimulate private sector investment, encouraging development across the country, driving levelling up ambitions, supporting regional development and creating jobs.

“Business needed government to deliver a structured plan to tackle the increasingly worrying macro-economic situation we’re facing. It has done this with a raft of measures aimed at delivering short-term growth and cutting taxes. What it has not offered is a view on how medium to longer-term investments can also support our economy back to prosperity while delivering ambitions around productivity, net zero and levelling up.”

National Infrastructure Commission chair Sir John Armitt welcomed pledges to prioritise publication of new National Policy Statements for energy, water resources and national networks, reform of the Nationally Significant Infrastructure Project planning system, and steps to amend onshore wind planning policy for England.

He said: “Removing additional planning barriers to onshore wind developments in England is the right thing to do and recognises the major role that wind energy can play in boosting domestic production.

“We also need to put wind in the sails of other major projects, including offshore wind and water supply infrastructure, which serve the national interest while ensuring proper engagement with local communities. Crucially that includes publishing updated national policy statements for key infrastructure sectors as soon as possible, which will allow government to set out its strategic objectives and guide the priorities of regulators, industry and investors.”

Civils contractors also welcomed the focus on driving economic growth through the acceleration of infrastructure delivery.

Alasdair Reisner, chief executive of the Civil Engineering Contractors Association (CECA) said: “Ahead of today’s fiscal event, we called on the government to publish an updated pipeline of schemes to enable our members to plan for growth, and it is to be welcomed that today’s announcement provides some of the clarity industry requires.

“We are in the process of evaluating the list of schemes at the moment and look forward to working with the government and our members to deliver spades in the ground on these projects at the earliest opportunity.

“Any efforts to accelerate infrastructure delivery should be applauded, as ultimately this will drive much-needed economic growth.

“However, we have seen efforts to speed up delivery by past administrations, so we hope that the new government will work with industry to ensure the measures announced today are genuinely transformative, and will enable the UK to harness infrastructure investment to deliver a high-growth economy in the months and years ahead.”

Patricia Moore, UK managing director at Turner & Townsend, said: “The chancellor has signalled the government’s desire for a substantial change in policy direction to galvanise the economy, and a number of measures will bring some immediate relief to many across the UK.  

“However, structural change is more challenging and there are practicalities to overcome. Long-term planning is necessary to deliver the energy infrastructure for a secure, sustainable power mix in the UK. But to stay the course on net zero, government strategy must look at reducing energy use, not just the impact of energy bills.

"A structural shift is needed in how we insulate and operate our buildings to make them more efficient. This requires accelerating investment in a market for retrofit in the UK that can become self-sustaining, encouraging new skills, economic growth, and a greener built environment.

“Just as with energy, the government’s commitment to get Britain building by streamlining major programmes across transport will bring excitement for some corners of the country. Yet planning processes are only one part of the puzzle. The real test will be in supporting a successful route to delivery.

"Government has a critical role to play in establishing best practice across sectors to help reform what the chancellor highlighted as a fragmented system in major infrastructure. Significant investment is needed in building the skills and capacity to get programmes set up right from the start and delivered in a joined-up way.

“The new ‘investment zones’ introduced by the chancellor have the potential to drive investment in the skills and sectors we need for growth – primarily advanced manufacturing capability and green jobs. The government must work closely with industry to maximise the impact of these zones if they are going to inspire greater regional funding and boost businesses and jobs.”

Tony Danker, CBI director-general, said: “This is a turning point for our economy. Like Covid, the energy crisis has meant government has had to spend massively to protect people and businesses. That means we have no choice but to go for growth to afford it.

“Today is day one of a new UK growth approach. We must now use this opportunity to make it count and bring growth to every corner of the UK. Fifteen years of anaemic growth cannot be repeated. 

“Taking action to get Britain’s economy moving again by beginning construction on transport and green infrastructure projects shows immediate delivery. Planning reform is long overdue. 

“A simpler, smarter approach to tax can pay dividends, and firms will be keen to make the most of the investment incentives on offer. 

“It’s not perfect - it’s just the beginning - but there’s plenty business can work with. The chancellor signalled more proposals to come this autumn and these will be vital to sustain momentum on growth.”

Shevaun Havilland, director general of the British Chambers of Commerce (BCC), said: “Businesses across the UK will enthusiastically welcome the chancellor’s pledge to focus on economic growth and speed up new infrastructure development.

“The Chamber Network is a great believer in giving firms the tools and support they need to create the wealth that funds government tax revenues.

“It is also good news to hear the chancellor has woken up to the need to take action on our creaking planning system. But we need to see this reform across the country, as it is currently too slow, complex and uncertain. It stifles business investment, expansion and growth.

“Inevitably, the devil will be in the detail of these proposals, and they must strike the right balance between reform and providing for a sustainable future.

“The introduction of Investment Zones also has the potential to finally deliver on the government’s long-standing promise to level up, if the scheme is truly UK-wide.

“Lessons also need to be learned from the past, it will be crucial to get these zones right from the start, otherwise they can simply displace growth and investment from one area to another without creating new economic activity.

“But this is a bold start, and the chancellor must now use this as a springboard to develop a comprehensive long-term economic strategy.”

Greg Jackson, CEO and founder of Octopus Energy, welcomed the news of bringing onshore wind planning policy in line with other infrastructure to allow it to be deployed more easily in England. 

He said: “This is a huge step which will unleash the power of British onshore wind energy, reducing bills for all. Octopus Energy will act fast to bring wind farms and lower bills to areas where communities want them.

“Onshore wind is cheap and incredibly popular with Brits – more than 13,000 people have asked us for a wind farm in their area. But unnecessary red tape has meant it has taken on average seven years to build and connect a new onshore wind farm. In reality, they can be built in months.  

“By putting onshore wind on the same playing field as other technologies, we can turbocharge our transition to net zero, increase the UK’s energy security, and wean ourselves off expensive gas for good.”

Peter Hogg, UK cities director at Arcadis, said: “The chancellor’s mini budget was anything but. This was a radical fiscal event on the scale of Nigel Lawson’s 1988 budget and, for those with long memories, Anthony Barber’s 1972 budget.

“The intention to stimulate growth and get the economy moving couldn’t be clearer and the sweep was wide – individuals, businesses and whole communities stand to benefit from personal tax reductions, corporation tax reductions & business incentives and the creation of the new investment zones.

“Whilst these measures, added to the recent announcement on energy cost support will be welcomed by individuals and businesses alike feeling the effects of the cost of living crisis, what are the longer term consequences?

“Investment zones are a promising initiative that offer real opportunity to accelerate investment and drive growth. Add in the suggested planning and regulatory reforms and these areas have the opportunity to be truly transformative – strong local leadership to capitalise on the opportunity will, however, be key.

“A reversal of the corporation tax rise will also be a helpful stimulant to business investment and job creation and stamp duty changes will certainly stimulate – or at least maintain – demand for housing; though does nothing for supply. Unless the investment zones pull this supply through, all the stamp duty change may do is shore up house prices in the face of rising interest rates and falling consumer confidence.

“All in all, the chancellor has piled the chips on one spin of the roulette wheel. If the measures collectively work to unlock the economy and stimulate growth then the move will be lauded as bold and audacious; if the growth doesn’t come – and come soon and come quick – then all the chancellor will have done is to trade a lot of long term pain for some fairly short term gain.”

Philippa Spence, MD of Ramboll UK, took a cautious approach, believing the chancellor’s energy support package leaves crucial environmental commitments out in the cold and misses out on the opportunity to prioritise green energy opportunities. 

She said: “There was a shadow over the good news of the generous energy support packages announced by Kwasi Kwarteng today for those concerned about the UK’s environment. The commitment to reform the planning process risks unwinding key environmental protections unless these are retained. The planning system does need reform, but not at the cost of our environment, already one of the most biodiversity depleted in Europe. The government must seek to achieve efficiency and environmental enhancement simultaneously.

“Kwasi Kwarteng promised to ‘unleash the power of the private sector’ and enable growth through a number of measures including tax cuts. To truly unleash the potential of industries supporting the green energy transition will also require clear policy signals that this is a long-term commitment, such as enabling onshore wind rather than resurrecting fracking. We have one of the best green energy opportunities globally and there is no doubt that with the right support, it will generate significant growth.”

Ministers say the government will set out further details of the Growth Plan in the coming weeks.

Click here to download The Growth Plan 2022.

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