Autumn Budget: The unlocking productivity edit
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The Autumn Budget’s message is pretty clear: boosting economic growth and productivity is right up there on the Government’s to-do list.
The Chancellor’s promise to shake up the planning process and invest in infrastructure sets the stage for some proper change in construction. So, what does all this mean for our sector?
Planning, leadership, and programme delivery
There’s some good stuff happening already, with the Planning Bill moving forward and big infrastructure projects still getting support – think the Lower Thames Crossing, new nuclear, and protection for the capital elements of the Spending Review. These moves are giving us much-needed certainty and helping cut down on those frustrating delays – if we can get the DCO pace back to 2010 levels that gives us £2 billion per year productivity uplift. The Office for Value for Money reforms are also letting Departments take the reins a bit more, increasing delegation of scope and funding to group projects into programmes and giving them the freedom to line up commercial relationships, guarantee a steady pipeline, and bring in Modern Methods of Construction (MMC) for a productivity boost.
Infrastructure: A pipeline of opportunity
So to our first deep dive – infrastructure – it’s actually where things are looking most promising. If can take advantage of the more programmatic approach (OVfM) and planning reforms, we’re seeing some big opportunities, up to £2 billion each, with another £1 billion potentially on the table if the Construction Skills Mission Board gets involved properly. But the real magic happens when sponsors, clients, and industry get their heads together early, building mature capability –especially in new markets such as nuclear, where there’s a chance to get it right the first time and unlock a tidy £3.5 billion per year. HMT’s taken the shackles off, so the clients, sponsors and private sector in the emerging markets have a real shot at stepping up.
Workforce and skills investment
On the people front, Government investment in the Construction Skills Mission Board shows they mean business when it comes to training and retraining. We’ve already got the board in place, with funding and policy changes aiming to get more folks skilled up or back into the trade. Of course, each sub-sector has its own story, but the groundwork is there for a more skilled workforce all round.
“All in all, the Budget’s got the right ingredients for a medium term boost in construction productivity.”
Sub-sector perspectives
Housing: Things are a bit tough thanks to the wider economic slowdown, but if the budget settles and inflation forecasts behave (fingers crossed for lower mortgage rates!), planning reforms could free up as much as £9 billion in productivity. The trick is to support the sector without sending house prices sky-high or handing out bonus windfalls to CEOs (thanks Help to Buy!). A few sensible conversations and maybe a more hands-on policy with house builders – encouraging supply chain investment, for better quality homes and local jobs, and more grown-up relationships – could add another £2.3 billion.
Buildings: The Building Safety Regulator (BSR) legislation is a good move, bringing together the right expertise earlier to boost productivity and quality – possibly unlocking £4.6 billion. And those Office for Value for Money reforms should help with social infrastructure delivery, giving clients and Departments more room to plan long-term. Success here depends on the right data and expertise, with another £3 billion up for grabs.
Repair, Maintenance & Improvement (RMI): Productivity opportunities are a bit thinner here, mostly because of the size and scale of individual projects and firms. It’s all about making things easier for SMEs and supporting the workforce. Apprenticeship funding helps, but the uncertainty around retrofit stuff (like the cancelled ECO scheme and no sign of a Warm Homes Plan) could put off new talent. If we get some of these issues sorted, we could be looking at up to £1.8 billion in productivity improvement each year.
A cautiously optimistic outlook
All in all, the Budget’s got the right ingredients for a medium term boost in construction productivity. But, let’s be honest, things like National Insurance hikes and a cooling housing market could put a bit of a dampener on demand. It’s going to take effort from both industry and Government to really make the most of this opportunity. If we pull together, the prize is pretty huge – £27.2 billion a year, or around a 1% bump in UK GDP. Who wouldn’t want that? Feels like there’s a strong case for working together for the good of the country. We’ll be keeping a close eye on progress to see if all these good intentions turn into real results.
The prominence of industrial strategy and research and development – particularly in clean technologies – signals a long-term commitment to innovation and resilience, with further detail on energy pricing changes set to follow. The Finkleton Report has rightly been praised for its bold recommendations, and the Government’s pledge to respond within three months underlines the momentum in this space. Perhaps most encouragingly, the strong theme of boosting domestic supply chains, drawing on hard-won lessons from offshore wind, to not only reduce imported emissions but also to support jobs and skills at home.
On the home front, there’s still a sense of waiting. The Warm Homes Plan, which many hoped would offer a clear blueprint for retrofitting homes and improving energy efficiency, remains unpublished – I suspect stalled by budget wrangling. Meanwhile, the underwhelming ECO+ scheme is winding down, which should help lower bills but leaves some uncertainty about scaling retrofit. The Government has hinted at ongoing support for home insulation, but without firm policy commitments, it’s tough to see how we get from ambition to action. Against this backdrop, it’s understandable why energy and climate experts argue that piecemeal measures aren’t enough; with the Government’s challenges demanding a truly integrated approach, NESO faces a near-impossible task in managing supply and demand on a green grid when the policy goalposts keep shifting.
Hannah Vickers is managing Director of Built Confidence.
