Builders' Merchants News
Autumn Statement 2015: The industry reacts
Published:  26 November, 2015

The construction industry is broadly in favour of the changes announced in the Chancellor of the Exchequer’s Autumn Statement, which was announced on Wednesday 25 November.

Initiatives on new homes, apprenticeship training and help for businesses were among the issues addressed by George Osborne in his first Autumn Statement and Comprehensive Spending Review of the Conservative government.

The Builders Merchants Federation (BMF) has welcomed Mr Osborne’s plans to introduce the largest affordable housebuilding programme in more than 30 years, which he said would address the crisis of home ownership and double the housing budget to £2bn a year.

John Newcomb, managing director of the BMF, said: “Ministers have told the BMF that 86% of people in this country want to become homeowners, so it’s no surprise that the Conservatives are concentrating on the General Election Manifesto pledge to have many more homes built - notably with their Help To Buy and Starter Homes’ policies.

“The Chancellor has signalled a clear policy intent by doubling the housing budget to £2bn a year. The impetus behind equity loan, mortgage guarantee and shared ownership schemes will enable builders to recruit the people and invest in the land and materials required.”

Meanwhile, despite the Construction Products Association (CPA) being pleased with the government’s plan to help first time buyers, the Association believes that solving the housing crisis has less to do with supporting demand and more to do with increasing the supply. Dr Diana Montgomery, chief executive of the CPA, said: “Yesterday’s plans – paired with a raft of measures addressing planning reforms, the release of appropriate land for housing and help for small and medium size housebuilders – may go some way towards achieving that.”

Brian Berry, chief executive of the Federation of Master Builders (FMB), has expressed his concerns about the construction skills shortage potentially spoiling the Chancellor’s vision for 400,000 new affordable homes by 2020.

He said: “Faced with some difficult decisions regarding public spending cuts, the Chancellor was right to ‘choose housing’ by prioritising investment in new affordable homes. Nevertheless, ‘George the Builder’ will need a new generation of ‘real’ builders to make his vision for housing a reality. We’re already seeing housing developments starting to stall because the cost of hiring skilled tradespeople is threatening to make some sites simply unviable.

“Unless we see a massive uplift in apprenticeship training in our industry, there won’t be enough pairs of hands to deliver more housing on this scale. That’s why we’re keen for the government to tread carefully when applying the new proposed Apprenticeship Levy to the construction industry.”

The Apprenticeship Levy will come into effect in April 2017, at a rate of 0.5% of an employer’s pay bill, thereby raising £2bn a year. According to Mr Osborne, there will be a £15,000 allowance, which means that 98% of employers won’t pay a levy. A new business-led body will also set standards for apprenticeships.

However, both the BMF and CPA echo the FMB’s concerns about how the Apprenticeship Levy will operate. Mr Newcomb said: “Setting the Levy at a rate of 0.5% of an employer’s payroll is higher than necessary - the BMF argued for a lower figure of no more than 0.3%. The government’s original aim was for it to apply to larger companies, however, BMF members now see that it will be imposed on firms with a payroll of more than £3m a year. This means that smaller firms, who perhaps employ less than 200 staff, may now become liable to pay the Levy. This is not good news.”

Ms Montgomery added: “Some in our industry will be pleased to hear the Chancellor clarify its ambitions for the Apprenticeship Levy. However, while the Chancellor has suggested that less than 2% of UK employers will pay the Levy, we estimate it may affect manufacturers with as few as 100 employees.

“We appreciate the establishment of a new employer-led body to set apprenticeship standards and ensure quality, not quantity. However, this body needs to include manufacturers and distribution representatives of the construction supply chain. The critical focus must be on a ‘light-touch’ approach that delivers the right skills.”

While the Chancellor announced an extension to the Small Business Rate Relief scheme, which helps the nation’s smallest firms to pay less tax on their premises, Mr Newcomb believes that while the extension of the scheme for another year looks appealing, it will have little effect on BMF members. He concluded: “Most members are currently at a disadvantage because they tend to be small businesses with a large trading footprint. No account is taken of space utilisation, company size, or staff numbers.”

“Mr Osborne failed to mention the on-going review into the structure and burden of business rating. Current arrangements are out-of-date and he should resist the temptation to tinker on the edges. Rates need to be urgently and completely overhauled to make them fairer for merchants.”