Budget is a ‘critical’ moment for construction

This week’s Budget will be a critical moment which has the potential to set the tone for the construction sector over the coming years, according to one Lancashire business adviser.

Looking ahead to Wednesday’s statement, Joe Sullivan, a Preston-based partner in the real estate and construction team at national accountancy and business advisory firm MHA, highlighted the sector’s ‘glaring omission’ in the government’s recently announced Invest 2035: UK Modern Industrial Strategy.

The S&P Global’s Construction Purchasing Managers Index (PMI) has maintained a position above 50 for several consecutive months, including jumping to 57 in September, a two-year high.

Joe said that re-enforced the sense the sector was on the path to recovery, buoyed by improved supply chain conditions and a notable reduction in labour shortages.

However, he claimed there were several headwinds facing the construction industry and it was critical for the government to use the budget to include the sector its growth plans.

He said: “While the announcement of Labour’s housing plan has been welcomed, our clients are telling us that the uncertainty as to further announcements in this month’s budget is causing a delay with investment decisions.

“Achieving the government's housing targets will require planning reforms and significant investment in infrastructure, such as transport, schools, and healthcare, along with policies to attract businesses and create local employment opportunities.

“The industry also faces an urgent skills shortage. The Construction Industry Training Board estimates a need for 152,000 more workers to meet housing targets, while the Home Builders Federation highlights that one in five builders is over 50, underscoring the need for fresh talent in the sector.”

Joe added recognising construction as a key growth sector in the Budget would ensure access to the necessary investment and policy support.

He said: “This includes funding for skills development, incentives for sustainable 'green' construction practices, and streamlining planning processes to make it easier for firms to meet the government's housing target of 1.5 million new homes and a new generation of towns,” he said.

“The budget will be a critical moment for the industry, with the potential to set the tone for the coming years. With careful planning and strategic investment, businesses can position themselves to capitalise on the evolving market landscape.”

Matthew Johnson, associate partner at Preston-headquartered accountants and business advisors WNJ, said companies were bracing themselves for a ‘bad news’ Budget.

He said: “The warnings are clear. Prime Minister Keir Starmer has already declared this month’s Budget is “going to be tough”. The only question is: Just how tough?

“The run-up has seen intense speculation on what tax hikes chancellor Rachel Reeves will announce when she stands up in the Commons to deliver her speech on Wednesday.

“And again, the writing has been on the wall, as she has now started talking about a £40bn funding gap – almost twice the size of the £22bn “black hole” Labour identified on taking office.

“If the pundits are right there are going to be some big announcements around taxes that will have impact on both businesses and individuals.

“From inheritance tax to fuel duty, the reports all point to a wide range of options being considered in the government’s bid to raise the cash it needs as it looks, in its own words, to “fix the foundations”.

“Little wonder the North and Western Lancashire Chamber of Commerce has reported that “taxation anxiety” is in the air for many businesses.”

The chancellor is planning to increase the amount of money the government raises in inheritance tax, according to a BBC report.

It is not known how many people are likely to end up paying more, or how much more they would pay under the plans that are reportedly under consideration.

The BBC says it is understood multiple changes to the tax, which currently includes several exemptions and reliefs, are on the table.

The tax includes a series of exemptions which over the years several governments have considered changing in order to raise more cash. It seems Labour is ready to bite the bullet.

Senior government figures have also been hinting that there will be increases to the amount of National Insurance (NI) paid by employers.

There has been growing speculation that the chancellor will scrap the NI exemption on employer pension contributions.

That has led to warnings such a move could hit payments into staff pension schemes and slow hiring or future pay rises, with small business hit the hardest.