29th December 2015

Spending Review 2015 analysis: talking points for construction companies

This year’s Autumn Statement and Spending Review were amongst the most anticipated of recent years with chancellor George Osborne tasked with revealing the extent and nature of his next round of cuts. 

Spending Review 2015 analysis: talking points for construction companies

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However, with typical political nous, the chancellor managed to make the spending review seem rather rosier than many expected, with no cuts to the police or tax credits. Many members of the construction industry will have looked on with interest – there was plenty in the speech to catch the attention of UK housebuilders and construction companies. Here are some of the main talking points from the 2015 Spending Review.

Doubling housing budget: 400,000 new homes built by 2020

Central government will double the housing budget to £2bn, with the aim to deliver 400,000 new affordable houses by the end of the parliament, including 200,000 starter homes (sold at a 20% discount off the market value to first time buyers) and 135,000 help-to-buy shared ownership homes. There will also be a help-to-buy scheme for Londoners. The total cost of all housing initiatives in the budget will be £9.6 billion.

HS2 construction will start during this parliament

The highly controversial HS2 line will start construction during this parliament, the Spending Review documents revealed, with nearly £56 billion in funding set aside for the project. The government believes that the project will support 25,000 jobs.

Transport funding changes

The Department for Transport will see its capital funding almost double over the course of the parliament to deliver HS2 and other infrastructure projects. However, the department will also have its day-to-day resources slashed – amounting to a 37% fall in its operating costs. By 2020, Transport for London will have to fund its services entirely through commercial investment. Rail subsidies will also be cut.

Buy-to-let and second home stamp duty rise

From April 1st 2016, buyers of second homes (including buy-to-let properties) will have to pay a higher rate of stamp duty – another 3 points on top of the current rate. This tax will raise £1 billion for the government. This charge will clearly have an impact on the attractiveness of buy-to-let investments, and is likely to affect the rental market.

Releasing public sector land with capacity of 160,000 homes

Land owned by the Ministry of Defence, the Department for Transport and other central government departments will be sold off, with the potential to provide space for another 160,000 homes.

Cuts to DECC and efficiency schemes

The Department for Energy and Climate Change has been one of the departments to suffer the most since austerity first took effect in 2010, and it’s seeing more cuts – 22% in day-to-day spending by the end of the parliament. The department is responsible for the bulk of energy efficiency initiatives: the renewable heat incentive is being ‘reformed’ to generate savings of £700 million (compared with its expected funding levels) and the Energy Company Obligation (ECO) is to be scrapped in 2017 and replaced with a cheaper initiative.

Overall, the industry has been split over this year’s spending review. While housing has clearly become a priority for the government, there’s no mention of construction skills shortages and the fact that many companies are operating at capacity. There are also major concerns about the transport cuts and the lack of support for energy efficiency and low carbon housing.

What are your thoughts on this year’s announcements? How will they affect your company? Leave us a comment below.


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