Last week, we released a blog detailing how the Stamp Duty holiday extension will affect property owners in the coming months. Today, our blog explores what the Chancellor’s Budget speech has revealed about the future of the construction industry.
Firstly, businesses within the construction sector (and without) have welcomed the extension of financial support for businesses, employees and contractors. The furlough scheme has now been extended until 30 September, while all self-employed people who have submitted their 2020-21 tax return will be able to apply for two further grants under the Self-Employed Income Support Scheme (SEISS). Mr Sunak also unveiled the new Restart Grant and Recovery Loan schemes, designed to support businesses through the remainder of lockdown and get them back on their feet once they reopen.
Rishi Sunak also announced the UK’s first Infrastructure Bank, which will start operating this spring. It will start out with £12bn of equity and debt capital to finance UK infrastructure projects across the public and private sectors, primarily focusing on ‘green’ infrastructure projects including clean energy, transport and waste management. In his speech, the Chancellor stated that the Infrastructure Bank is expected to finance over £40bn of projects across the country. In line with this green focus, Mr Sunak also announced a £20m fund to invest in the development of floating offshore wind technology across the UK.
Eight new ‘freeports’ will be established in England, the Chancellor revealed, located at East Midlands Airport, Felixstowe and Harwich, the Humber Region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside.
Freeports are designated zones in which businesses benefit from simpler planning, cheaper customs “with favourable tariffs, VAT or duties”, and lower taxes. Support for construction businesses located in these areas will include an enhanced 10% rate of Structures and Buildings Allowance, a capital allowance of 100% for investment in plant and machinery, as well as full Stamp Duty and business rates relief, until 30 September 2026.
Modern methods of construction (MMC) have been seen for many years now as inextricably linked with the future of the construction industry. In recognition of this, the Chancellor also announced the establishment of an ‘MMC taskforce’ backed by £10m government funding, which will aim to “fast-track” the adoption of MMC methods across the industry.
In order to encourage higher levels of business investment, the Chancellor next announced a new 130% first-year capital allowance (which he termed a ‘super-deduction’) for companies investing in qualifying plant and machinery assets. The super-deduction will apply on qualifying investments from 1 April 2020 until the end of March 2023, and will enable companies to cut their tax bill by up to 25 pence for every £1 they invest. Qualifying investments include (but aren’t limited to):
- Solar panels
- Computer equipment
- Tractors, lorries & vans
- Ladders, drills, cranes etc.
- Office equipment such as desks and chairs,
- Electric vehicle charge points
- Foundry equipment
On the less positive side of things, he also revealed that corporation tax will be increasing by 6% to stand at 25% from 2023, for businesses with profits over £250,000 (although businesses with profits less than £50,000 will continue to be taxed at 19% according to a new small profits rate). Companies with profits between these two thresholds will be taxed on a sliding scale, with only the largest companies paying the full 25%.
Training and Apprenticeships
In an industry facing a severe skills shortage within the next few decades, construction businesses will likely welcome the increased government funding for trainee placements and apprenticeships announced in Mr Sunak’s speech. The cash incentive for employers hiring new apprentices has now been doubled to £3,000 for each apprentice taken on between 1 April and 30 September this year, on top of the £1,000 government grant for apprentices aged between 16 and 18 and those under the age of 25 with an Education, Health and Care Plan (EHCP).
Furthermore, an addition £126m has been earmarked for“high quality” work placements and traineeships for young people aged between 16 and 24; it is expected to open up another 40,000 traineeship placements within the next year.
A positive Budget
This is a Budget that promises a bright future for the construction industry. Its focus on investment, infrastructure, and green construction methods, combined with tax breaks and incentives for training the next generation of skilled construction workers, shows that the government clearly understands the vital role this industry has to play in the future economy and the country’s economic recovery from the global pandemic.