Pre-Budget Comment for the Construction & Real Estate Sector
Despite a challenging backdrop, there are several measures that the Chancellor could announce to support one of the UK’s largest sectors.
The Construction industry contributes 8 per cent of the UK’s GDP, employs over 10 per cent of its workforce, which is made up largely of SMEs, and it is estimated that every £1 spent creates almost £3 of value to the whole economy, according to The Construction Leadership Council.
There are several measures that the Chancellor could announce that would help developers, encourage sale of homes, meet the sustainable agenda, reinvigorate town and city centres, and treat more fairly those trapped in unsafe multi-occupational buildings. Savings in the Spending Review may prove hard to come by as the Government has been supporting UK construction with its investment in civil infrastructure, which is popular amongst the regions.
Some of these measures could be:
- A re-extension of the temporary stamp duty nil rate band for residential homes, which had increased to £500,000 ended on 31 July 2021 and is now back to £125,000, would help sales of houses. Not many residential homes are available at below £125,000 and a re-introduction of this successful policy would help the housing market and new homes.
- The Government’s excellent planning reforms need to be improved and require an integrated planning system to meet local, environmental and legislative concerns, so that the planning process can be made smoother and quicker. This demands a common-sense approach from both Rishi Sunak as Chancellor and Michael Gove in his new role as Secretary of State for Housing, Communities and Local Government (MHCLG).
- The introduction of a land tax to incentivise the use of land would not be popular with the traditional Conservative voters, but it would further stimulate the housing market and encourage developers to build instead of “land-banking.”
- Incentives to regenerate the high streets and allow mixed developments would encourage the re-use of buildings, support a retro-fit agenda and so meet environmental concerns in the approach to net zero carbon as well as helping those many small businesses in towns and city centres that have been devastated by reduced footfall due to Covid-19.
- Greater tax incentives and policies designed to help insulate 22 million English homes as identified in the National Retrofit Strategy (NRS) would further accelerate the achievement of net zero carbon.
- The Annual Investment Allowance (AIA) threshold could be sought to continue as the current temporary increase to £1 million ends on 31 December 2021. Alternatively, a higher threshold could be targeted to facilitate tax relief on typical retrofitting works – e.g., through a ‘Green AIA’.
- And finally, greater funding of the Building Safety Fund is required to replace all the unsafe cladding systems (3,000 applications already submitted to the MHCLG) and allow residents in multi-occupational buildings to be safe in their homes.
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