Reactions to UK Spring Budget

UK Chancellor, Jeremy Hunt's Spring Budget, has received mixed responses from industry leaders and company representatives across the built environment, technology and retail sectors.

Responding to the Chancellor's announcement of new measures to support the retail sector in his "Budget for growth" - including extending the provision of free childcare to the working parents of under 3s and extending the energy price guarantee which limits annual household bills to 2,500 for 3 months from April when it was due to expire for a further three months (Retail Trust CEO, Chris Brook-Carter, has identified energy inflation as a key reason for consumers scaling-back everyday retail purchases), Paul Lynch, Head of UK Experience & Commerce UK&I for retail data analytics company, Merkle, said:

“While the UK seems unlikely to enter a technical recession this year, this is not a time to relax. The government must continue to show their support to retailers and implement actionable measures going forward to ensure they can thrive.Here are the key areas for focus:

"Bringing excitement back to highstreets: “We need to engage businesses to invest back into our highstreets to drive footfall and improve the economy.

But we need a way to revolutionise the highstreets’ offering; retail how we know it is on a downward spiral.

“But the onus isn’t all on the government.

Retailers need to improve their offerings to shoppers to entice them back.

For example, coffee shops or bakeries could be the initial reason customers visit a store.

Dr David Crosthwaite, Head of Consultancy Services at the Building Cost Information Service (BCIS), said: "The announcement that five construction occupations will be placed on the Shortage Occupation List is a beacon of hope in an otherwise underwhelming Spring Budget, that lacks a clear industrial strategy to encourage construction investment and stimulate economic growth. 

Similarly, a menswear store could partner with a barber shop to offer haircuts; but the store also is a showroom for the men's brand.

Here, we need to start thinking collaboratively to provide an unusual and unique offering to shoppers.”

"Engaging a younger workforce:There has been a spike in economic inactivity post-pandemic; to encourage the younger workforce back, the government must introduce ways of engaging them through digital roles and enable UK employers to recruit locally. The support with childcare costs came as a welcome announcement in the Spring budget, but similar more specific strategies will be required for introducing and keeping digital talent, especially as desired skill sets are continuing to evolve in our digital world.

Hunt announced an extension of the Climate Change Agreement scheme, promising further to deliver extensive nuclear and energy relief support. However, Paul Wrighton, Director of Sustainable Infrastructure at Johnson Controls, said the government must implement more specific strategies if the UK is to make significant steps towards net zero:

“Businesses also need to remain competitive with new talent.

The employment market is improving for employers, but staff have higher expectations than ever – it’s not as easy as increasing wages.

To attract and retain talent, businesses have to offer more in terms of benefits packages and perks.”

Dr David Crosthwaite, Head of Consultancy Services at the Building Cost Information Service (BCIS), said: "The announcement that five construction occupations will be placed on the Shortage Occupation List is a beacon of hope in an otherwise underwhelming Spring Budget, that lacks a clear industrial strategy to encourage construction investment and stimulate economic growth. 

"The announcement of measures to boost the number of Ukrainians entering the labour market and returnerships, targeted at the over 50s – will do little to replenish construction’s dwindling workforce.

We need a more concerted approach that prioritises investment in apprenticeships and training, to tackle ingrained labour shortages.  

"BCIS welcomes the continued commitment to capital investment programmes.

But the fact that many of these have been postponed – such as parts of HS2 and Lower Thames Crossing – will inevitably push up the price of these projects in the long term, due to their budgets being eroded by inflation.

"The government’s commitment to public sector investment is encouraging and we look forward to the publication of the National Infrastructure and Construction Pipeline later this year, to see how much of the £600 billion is invested in construction."

Hunt announced an extension of the Climate Change Agreement scheme, promising further to deliver extensive nuclear and energy relief support. However, Paul Wrighton, Director of Sustainable Infrastructure at Johnson Controls, said the government must implement more specific strategies if the UK is to make significant steps towards net zero:

"The chancellor’s action on energy – especially the extension of the Climate Change Agreement scheme - sends a relatively positive message, however the lack of clear ringfenced funding for wider energy efficiency measures is disappointing, especially at a time when cost pressures for households and businesses are going nowhere fast.

"The current boiler upgrade scheme has a budget of £150m each year for three years and aims to issue 30,000 vouchers annually.

But in the first eight months of operation, only 9,888 grants were awarded. There’s a huge opportunity to put tension on the matter with a real nationwide programme to accelerate the change. 

What we need to see now is the government supporting businesses in getting the technical assistance they need directly or via industry partnerships so they can identify opportunities to reduce emissions and develop a plan to transition to net zero.

This could include providing access to experts in energy efficiency, renewable energy, or other relevant fields.

It’s also important for the government to facilitate knowledge sharing and best practices by creating networks or platforms for businesses to share information and ideas about how to reduce emissions.” 

Jeremy Hunt also set out his plan to encourage economic growth across the UK, announcing 12 new high investment zones located in the Midlands, Greater Manchester, Teesside, Liverpool, and other parts of the Midlands and the north as part of the government's "levelling up" agenda (the East of England and the Northwest are the second and third most popular locations for housing market activity in the UK, with 39,237 and 38,838 property sales registered in 2022, respectively).

Responding to proposals in the budget to ‘supercharge’ these regions with £80 million of funding over five years in an aim to improve skills and local infrastructure clustered around universities or research institutions will aid sectors such as technology, artificial intelligence, and the creative sector, David Hannah, Group Chairman of property taxation consultancy Cornerstone Tax, said:“The announcement from the Chancellor of 12 new investment zones spread across the West Midlands, Greater Manchester, the North East, South & West Yorkshire, East Midlands, Teeside and Liverpool will drive property prices in these regions.

There has been a concerted effort from the government to spread the wealth evenly throughout the UK and the introduction of these investment zones should increase the amount of jobs and businesses in these regions which will inevitably effect property prices.

"Not to mention providing more job opportunities for those who are currently unemployed causing a rise in wages and potential property buyers.

The chancellor did outline employment as a priority in the announcement and a measure which the government introduced of having apprenticeships available in the skills trades for over 50-year-olds could positively affect the chronic undersupply of properties in the housing market.

"This is a good measure that helps address skills shortages, which are currently affecting 83 per cent of businesses within the construction industry, according to research by recruitment specialist Search Consultancy.

I think anything that they can do to expand the construction sector is welcomed – it is a supply crisis that we are seeing in the property market, not a demand crisis.

They are focusing on getting workers to return back to work and that should inevitably speed up construction.

Commenting on provisions announced in the Budget that take effect from April 2023 until the end of March 2026, allowing companies to can claim 100 per cent capital allowances on qualifying plant and machinery investments, Kersten Muller, Head of Real Estate at Alvarez & Marsal Tax, said: “Reform of the capital allowances regime is welcome news, the Government will effectively be giving 25 per cent relief from April onwards, this means there will be no cliff-edge after the super-deductions end in March 2023.

“The reform of the capital allowances regime should provide an incentive for investment, this particularly welcome at a time when property owners and businesses are looking at ways to make their properties more energy-efficient and reduce the carbon emissions they produce.

“Collaboration between owners/investors and the occupiers will be required to ensure that the incentives are utilised in an optimal way, help businesses grow and stimulate the economy.”

Jatin Ondhia, CEO of investment platform Shojin Property Partners, said: “Prudence and stability were clearly right at the heart of Hunt’s Spring Budget.

Undoubtedly, the hangover effect of his predecessor’s gargantuan economic gamble - and the corrective fiscal squeeze that followed - left little room for any wild cards.

“From the perspective of where the government and economy found itself in late 2022, a relatively quiet Budget is not a bad thing.

It shows they are being financially responsible.

However, at a time when sky-high inflation is compounding the housing crisis, is no news really good news?

Building costs are through the roof and access to finance remains a big issue for developers, in turn damaging efforts to boost the UK's housing stock.

“Quite ridiculously, the revolving door for housing ministers has left the UK with six different MPs holding the role in the space of a year, while the scrapping of mandatory housebuilding targets, means that what we needed today was some clear policies to get Britain building.

While all eyes will remain on Hunt and Sunak’s conservative fiscal policies, the lack of decisive action on planning reforms, construction output and the lack of affordable homes could be a dangerous oversight.

Evidently, the private sector will have to forge ahead to ensure property development continues at pace."

Paresh Raja, CEO of Market Financial Solutions, said: "It's no secret that there are issues requiring attention in the property sector, most notably where housebuilding activity, planning regulations and the national housing stock are concerned.

Clearly, as Hunt looked down his list of priorities for this particular Budget, these items were overlooked in favour of other pressing concerns.

While there may not have been any noteworthy policies or investments relating specifically to property, his efforts to combat the cost-of-living crisis and bring much-needed stability to the economy should be welcomed.

"We saw how tumultuous the effects of the mini-Budget were back in September.

The ill-fated announcement fuelled significant interest rate changes and a great deal of uncertainty.

Hunt has favoured a cautious approach, and the property market will likely benefit from a sense of economic calm, particularly if inflation continues to fall and interest rate hikes come to an end."

Said Rashid, Editor-in-Chief of FM Magazine, said:"On balance, the Chancellor's Spring Budget speech was probably about right, given the reaction of global capital and money markets to his predecessor's progressive, but unfunded, ambitions for fiscal reform.

Hunt, however, is clearly constrained additionally by Conservative party ideology, which will continue to limit the economic impact of some of his headline announcements today.

"For me, the standout example is the promise of free childcare for working parents of the very youngest children, which is being introduced without significant reform of the benefits system to support fulltime employment.

It is widely accepted, for example, that capping the earnings of up to 5.7 million people on Universal Credit - the government's flagship benefits programme for parents and non-parents alike, disincentivises recipients from engaging with fulltime employment, as they are typically allowed to retain the equivalent of one week's pay for every full month worked, before the government claws back financial support completely.

"Rather than promising a cheering House that he would double up on enforcing benefits 'sanctions', a hostile and punitive measure that suspends payments to claimants, often for minor infringements of their benefits 'contract' (such as missing an appointment at their local Jobcentre); and as frequently penalises vulnerable families who are already experiencing food poverty, energy poverty and child poverty during the ongoing cost-of-living crisis, the Chancellor might usefully have extended the spirit of 'Bonne volonté' he willingly demonstrated towards business owners with his capital investment breaks by raising the cap on benefits' earnings by a similar magnitude.

Doing so would also have helped historic employers of parents with young children better, at a time when many companies in the cleaning, foodservice and retail sectors are reporting difficulties recruiting staff.

"The government's 'levelling up' agenda becomes problematic, indeed, when it prioritises long-term investment in the physical infrastructure of Britain's towns, cities and regions over people's immediate needs."