There’s no doubt that the volatility of the pound is making budgeting for new and existing projects difficult, especially when construction materials are being imported from abroad. On the client side, getting fixed cost quotes has been challenging. This complicates setting out clear budgets and calculating return on investment (ROI).
However, with fewer projects going ahead, contractors are dropping their prices – which have been very high for the past two years as demand outstripped supply – squeezing profit margins and risking unexpected hikes in import costs leading them into administration.
The government’s Growth Plan set out in September’s mini-budget has received mixed reactions from the sector. Let’s take a closer look at some of the changes set out, and what they mean for the construction industry.
Plans to get Britain building
The mini-budget puts a strong emphasis on economic growth. Although experts think this is a gamble, the Federation of Master Builds (FMB) said it offers hope to small builders by unlocking government surplus land and extending the stamp duty thresholds from £125,000 to £250,000, or from £300,000 to £425,000 for first-time buyers.
Other measures include designated investment zones across England, where businesses will get large tax breaks and be free of normal planning regulations, however, some are concerned by the downgrading of environmental considerations.
New legislation reduces requirements for environmental assessments, waters down habitats and species regulations and reduces the consultation process. This will also make it easier to change and develop consent order applications after they’ve been submitted.
Sustainability and net zero
Removing red tape is a controversial move when the country is striving toward net zero. But it’s not all bad news for sustainability. Brian Berry, Chief Executive of the FMB commented, ‘We’re pleased to see a small step forward in improving the energy efficiency of homes in the Chancellor’s ‘Growth Plan’, which will incentivise energy companies to help customers upgrade their homes. However, what’s really needed now to boost local growth and skills is a fully-fledged national retrofit strategy focusing on the UK’s 29 million leaky homes.’
Lobbying for a national retrofit strategy to improve the energy efficiency of the country’s housing stock is a cause that the industry has been actively involved in as homeowners are hit with rising energy costs and the threat of a winter of discontent.
As for net zero, the commitment to achieve this by 2050 is still in place, and the government is due to review plans to meet this target. MP, Chris Skidmore has been tasked with spending the next three months leading an independent review into how to deliver net zero while maximising economic growth, investment, supporting energy security, and minimising costs to businesses and consumers.
Tax cuts
While the plan to abolish the 45p tax rate has been scrapped, so has the planned increase in corporate tax. That means it will remain at 19% as the government aims for a 2.5% trend rate of growth.
This is alongside measures such as reversing the 1.25% rise in National Insurance, and plans to make the Annual Investment Allowance of £1 million permanent, rather than returning to £200,000 in March 2023. That means businesses will get 100% tax relief on plant and machinery investments up to £1 million.
As companies face higher costs for materials, labour, energy and transport, this support has been welcomed and is expected to ease some financial pressure.
Conclusion
In summary, while the Growth Plan offers hope for the future, many companies and industry experts are still cautious and would like to see the government follow through on its commitments and provide greater clarity on how changes are going to be achieved.
To find out how Multiproject cost consultants can support your business during challenging times, get in touch today on 020 7096 8235.
