Spring Budget 2024

The Chancellor yesterday delivered his Spring Budget, billed as the ‘Budget for Long Term Growth’.  Promising a ‘high wage, high skilled economy’ through more investment, lower taxes and better public services, the key points for businesses in construction included:

• An extension to full expensing to include leased assets, when fiscal conditions allow, with draft legislation due to be published shortly.
• Maintaining last year’s fuel duty cut of 5 pence until March 2025 and freezing fuel duty rates for 2024/25.
• Reducing the employee National Insurance rate from 10% to 8%, and the self‐employee National Insurance rate from 8% to 6%, from 6 April 2024.
• Increasing the VAT registration threshold from £85,000 to £90,000 from 1 April 2024.
• Extending the Recovery Loan Scheme with a further £200 million, to be known as the Growth Guarantee Scheme, providing SMEs with Government‐backed loans that have better repayment terms and lengths than the wider market.

The Chancellor also announced was additional investment in new housing projects, an extension of the Long‐Term Plans for Towns to 20 new places, and a new £160 million deal to acquire two sites to develop nuclear power, stating that ‘stimulating investment is the most effective way to raise productivity and therefore wages and living standards’.

Whilst this was a Budget clearly focused on households, which is unsurprising given that it is the last Budget before a General Election, it had very little for the housing market and house building despite the sharp fall in demand. Private house building in December 2023 was already 25% lower than in October 2022, just after the Government’s Mini Budget that led to the initial spike in interest and mortgage rates. Furthermore, house building is likely to decline further this year based on the sharp falls in housing new orders and house building starts in 2023 H2.

Budget 2024 did say that “The government continues to invest in infrastructure and will deliver over £600 billion of planned public sector investment over the next five years” but the reality is that infrastructure output in December 2023 was 15% lower than a year earlier.
 
Of the few bright spots for construction product manufacturers the extension of full expensing to leased assets will benefit smaller companies in particular, and the CPA are urging draft legislation to be brought forward as soon as possible so that this measure can be made permanent. The CPA also noted the Chancellor’s ambition to find productivity gains across public services and, given that government is the largest UK construction client, significant gains could be realised with the implementation of existing proposals such as the Construction Playbook, which sets out key policies and guidance for how public projects and programmes are assessed, procured and delivered.

Sources: Build UK and CPA (7.3.24)