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Autumn Statement receives mixed response
Published:  06 December, 2012

Yesterday's Autumn Statement from Chancellor George Osborne has had a mixed response from the construction industry.

"Our economy is healing," the Chancellor said. "The deficit has fallen by a quarter in just two years, and today's figures show it is forecast to continue to fall." The Office for Budget Responsibility (OBR) forecasts the economy will shrink by 0.1% this year, adding that problems in the Eurozone would "constrain growth for several years to come".

The Chancellor has said a raft of major construction projects will help boost the UK's economic growth. These include an additional £1 billion on four road schemes, an extension of the London Underground and work on flood defences.

The main rate of corporation tax is set to fall by 1% to 21% from April 2014, which Osborne said is the lowest rate of any major Western economy.

Brian Berry, chief executive of the Federation of Master Builders (FMB), said: "The Chancellor should have taken the opportunity to support the government's Green Deal energy-efficiency initiative by introducing more incentives, including a lower rate of VAT on housing repair, maintenance and improvement work to encourage homeowners to take advantage of the Green Deal. Local building companies are best placed for this type of work, but are reluctant to jump

through the hoops involved without stronger market demand."

He continued: "The £5billion for capital investment is good news and clearly shows the government recognises the positive impact a growing construction sector has on the economy. However, the Chancellor should have done more beyond the measures to support 120,000 new homes already announced. That is just half the number of new homes needed each year to meet current demand. If the government cannot find additional funding for affordable housing it must redouble efforts to improve access to mortgages so the private housing market can help deliver a significant increase in the number of new homes being built.

"Efforts to bring forward new sites for development quickly by releasing public-sector land and investing in infrastructure are welcome, but too often these measures don't benefit smaller house builders. The funding to unlock stalled sites needs to be readily available for use on smaller scale developments, so that the thousands of small and medium-sized firms can boost the industry's production capacity.

"More than 40% of construction SMEs have found it more expensive to access credit in the past two years, which has led to lost growth opportunities and cuts in employment and training. Construction businesses are also experiencing smaller workloads because their clients can't access finance. The government must work hard to ensure the Business Bank gets finance flowing to firms of all sizes as soon as possible."

The Forum of Private Business welcomed much of what was in the Autumn Statement, particularly the cancellation of the fuel duty rise. "A 3p rise in January would have been nothing short of economic vandalism in the current climate," said chief executive Phil Orford. "In fact, it would have been hard to imagine a worse start to 2013 for the UK economy. No doubt the Chancellor will have heard the nation's collective sigh of relief at the news January's hike has not just been delayed, but abandoned altogether.

"Fuel prices have reached a cliff edge, and the Chancellor has acknowledged this with today's announcement. He has also clearly heeded the overwhelming objections from small businesses that high fuel prices are hampering their own growth ambitions on a number of levels. We had urged the Treasury to commit to a fuel duty stabiliser by the end of the current Parliament, so what we have here is temporary relief instead of a serious policy change with lasting benefits, but we can't see many businesses bemoaning that just yet."

Brian Murphy, head of lending at Mortgage Advice Bureau, said: "George Osborne is to be applauded for including affordable housing among the government's priorities for spending. The pledge to support the construction of 120,000 new homes, bringing the annual total to 230,000, will go a long way to ease the pressure on the nation's current housing stock. The Mortgage Advice Bureau's National Mortgage Index shows that house prices have risen fastest in Greater London, the South West and Yorkshire and the Humber during 2012. So in the interests of those who would otherwise be priced out of the property market, it is encouraging that these regions will gain over 34,000 new homes with affordable rent, with a further 4,200 empty homes being returned to use."

The Construction Products Asssociation gave a slightly more cautious welcome to the Statement.

Chief executive Diana Montgomery said: "The Chancellor clearly recognises the need to stimulate growth through construction activity and has made several announcements that are a step in the right direction. However if you put these announcements into context, the benefits to our sector are less clear. Throughout this year, construction has been contracting by £1 billion each month, so his announcement that there will be an additional £5 billion added to the capital budget over three years, will do very little to offset the losses we are already experiencing, especially as that £5 billion is not just for construction but includes IT, exports and skills.

"Although the Autumn Statement included a number of re-announcements we do welcome the emphasis on road maintenance and repair which will benefit from £725 million from April next year. This was something we called for in our letter to the Chancellor last month and we are pleased he has heeded our request."