How will the Autumn Statement 2023 affect the Construction Industry?

On 22 November 2023 Parliament was presented with the Chancellor’s Autumn Statement. Reducing debt, cutting tax and supporting British businesses are some of the key areas that the government focused on within the statement. But how will this affect the construction industry?

Reforms to the UK planning system

The government announced its intention to reform the UK’s current outdated planning system. The statement included announcements to progress the National Infrastructure Commission’s April recommendations on planning, and will implement reforms to return the Nationally Significant Infrastructure Project regime to a two and a half year average consenting time.

An additional £32million will be invested across housing and planning in the UK, including funding to tackle the planning backlogs in Local Planning Authorities (LPAs) and £5million invested to incentivise greater use of Local Development orders.

These measures will tackle the delays and inefficiencies currently experienced in the planning application process and should increase the number of homes in the UK. However, the effectiveness of these measures remains uncertain due to  the recent fall in demand for new homes.

Introduction of new premium planning services and a new permitted development right

The planning system’s capacity will be strengthened by the introduction of new premium planning services. Plans will be brought forward for LPAs to offer guaranteed accelerated decision dates for major applications in exchange for a fee, which will be refunded if the timelines are not met. Having a timescale and agreed date for a decision will be extremely useful for housebuilders.

A new permitted development right to enable one house to be converted into two homes will be introduced to reform and streamline the current planning system. The permitted development right will be beneficial for smaller and medium sized developers, as only 5% VAT will be payable on the costs of creating the homes. However, the question remains as to whether this appropriately addresses the long-term housing issues experienced in the UK.

Reforms to the electricity grid and nutrient mitigation schemes

The government has announced reforms to the grid connection process and the funding of £110million to support LPAs to deliver high quality schemes to offset nutrient pollution. The reforms to the grid will help a significant majority of projects to get their requested connection date without having to wait, and are intended to reduce the overall connection delays from five years to six months for viable projects. Over the next five years up to 40,000 homes and planning permissions are said to be unlocked by the delivery of high-quality nutrient mitigation schemes.

Rico Wojtulewicz, Head of Policy and Markey Insights of the National Federation of Builders, has welcomed these announcements and commented on how areas like the grid and nutrient neutrality “disproportionally harm the construction industry”, particularly small and medium sized housebuilders. These announcements highlight the government’s commitment to foster growth and steps to remove the unnecessary planning permission restraints that commercial premises face.

Extension of full expensing

At the Spring Budget 2023, the government announced that businesses could write off the full cost of qualifying plant and machinery investment for a period of three years. The Autumn Statement 2023 has announced that this full expensing will become permanent. Full expensing is hoped to unlock an additional £14 billion of investment and makes the UK’s capital allowance regime one of the most generous worldwide.

Construction companies, particularly larger companies that heavily invest in plant and machinery, will be grateful to hear this announcement. The announcement also provides an opportunity for the construction industry to work with the government to develop the policy further. Marie-Claude Hemming, director of operations at Civil Engineering Contractors Association, commented on how this allowance could be developed to include assets for leasing as majority of construction companies hire its plant and machinery.

Funding in apprenticeships for key sectors

The Government announced that it will be committing a further £50 million for a 2-year pilot to explore ways to stimulate training in growth sectors and address barriers to entry in high-value apprenticeships.

As to whether this will include the construction sector remains unclear. If so, this will be a well welcomed boost to the sector which relies on apprenticeships as a way to generate employment. The announcement shows the government’s effort to develop value and skilled employment within the UK.

Decarbonising the economy

The critical national priority designation for nationally significant low-carbon energy projects will be extended to create more certainty for investors in low-carbon infrastructure. Consultations will take place on measures to reduce unnecessary delays within the UK, these will include amending the National Policy Framework to prioritise the rollout of electric vehicle charging infrastructure and the introduction of a new permitted development right to end the blanket restriction on heat pumps located one metre from a property boundary. Funding and investment to decarbonisation has been a previous concern and the announcements have the potential to increase demand for construction work in these areas.

The Autumn statement provides some hope for the construction industry, and seems to reaffirm the government’s commitment to investment and improving efficiency. There are some missed opportunities and absences by the government on areas that substantially impact the industry, such as discussions on fuel duty and an updated national infrastructure and construction pipeline. We look forward to the provision of further detail by the government to be able to fully understand the potential and impact of these measures.