Construction sector responds to Labour’s first budget in 14 years

October 31, 2024

In its first budget after a 14-year hiatus, the Labour government has sparked mixed reactions across the construction sector with a range of fiscal measures and funding announcements aimed at supporting sustainable housing, tackling the housing crisis and enhancing skills within the industry. Chancellor of the Exchequer Rachel Reeves introduced several impactful policies, including a national insurance increase for employers, a freeze on fuel duty and a significant investment boost towards affordable housing and infrastructure.

One of the key changes includes raising employers’ national insurance contributions from 13.8% to 15% while also lowering the threshold from £9,100 to £5,000. In an effort to offset some of the impact, Reeves announced an increase in the employment allowance, which will rise from £5,000 to £10,500 next year, effectively relieving 865,000 employers of national insurance obligations.

The housing sector stands to benefit from a dedicated £5 billion fund aimed at increasing affordable housing stock and recruiting additional planning officers to help drive housebuilding. A further £1 billion has been allocated specifically for removing dangerous cladding on buildings. Reeves also earmarked £3.4 billion to improve home energy efficiency, supporting the government’s goals to reduce household energy bills and carbon emissions.

Rachel Hughes, Marketing Director of Wienerberger UK, expressed optimism, welcoming Labour’s approach as a positive direction for sustainable construction. “The Labour government’s Autumn Budget sets the stage for a shift towards sustainable construction in the UK,” Hughes stated, commending the budget’s decarbonisation focus and its aim to foster innovation in construction. She noted that the government’s £5 billion Affordable Homes Programme, with the potential to deliver up to 33,000 new homes, highlights a significant commitment to addressing the UK’s housing crisis. Hughes also pointed out the emphasis on creating 5,000 affordable social homes, adding that this would improve housing accessibility for those in need. She underscored the importance of the new five-year social housing rent settlement, which promotes long-term financial planning, and praised the efforts to preserve council housing stock by reducing Right to Buy discounts.

The Construction Industry Training Board (CITB) sees Labour’s budget as an opportunity to bolster skills and workforce supply but underlined the scale of the industry’s demands. Tim Balcon, CITB’s Chief Executive, said, “Our research shows that under the Government’s homebuilding plans, up to an additional 152,000 workers will need to be found.” Balcon highlighted the necessity of a streamlined skills system, involving clear pathways into construction and collaborative initiatives between government and industry. While CITB recently supported over 29,000 apprentices, Balcon cautioned that apprenticeships alone may not be sufficient and that widening entry paths into the construction industry, through upskilling and recognising transferable skills, will be essential to meet demand.

For the Builders Merchants Federation (BMF), the budget’s revenue-raising measures are a mixed bag. CEO John Newcomb expressed concerns, particularly for SMEs that make up the majority of BMF’s membership. He warned that increasing costs from national insurance and minimum wage hikes would heavily impact the sector’s profitability, especially as these expenses would “immediately come off their bottom line.” While Newcomb acknowledged the positive news regarding fuel duty, he stressed that these fiscal pressures could hinder efforts to recruit and retain skilled workers crucial for meeting Labour’s ambitious housing targets.

Labour’s budget has certainly set the construction sector in motion, with plans for growth tied to sustainable practices, affordable housing, and an enhanced skills pipeline. However, as John Newcomb aptly concluded, “The devil is in the detail,” signalling the sector’s need for further clarity from the government on achieving the targets set forth in this landmark budget.

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