Construction’s budget submission warns of carnage without intervention

Chancellor of the exchequer Rishi Sunak

The Construction Leadership Council (CLC) submission to the chancellor comes just a month before his 2021 budget statement, which is scheduled for 3rd March 2021.

“Without further financial support many companies will become insolvent,” the CLC says.

While the CLC used to be a panel of business leaders, hand-picked by government to provide ministers with advice – all very much behind closed doors – it has more recently  transformed into a forum where construction industry trade associations gather, co-ordinating industry change initiatives. Although it has no apparent democracy, its legitimacy stems from the fact that it is administered by the government’s Department for Business, Energy & Industrial Strategy and is co-chaired by a junior minister (currently Anne-Marie Trevelyan).

In its new guise, the CLC says that its budget submission represents the views of the whole industry.

The letter, written by the other co-chair, Tideway boss Andy Mitchell, tells Mr Sunak: “Our industry remains in extremely challenging times as we continue to adapt to ongoing Covid-19 rules, mitigate the impact of Brexit and prepare for the forthcoming implementation of rule changes on IR35 and the Construction Industry Scheme. It is also important to note that, by continuing to operate, the industry has suffered a serious financial impact as a result of project delays and costs incurred in adapting working practices. This has resulted in many contractual disputes which our monitoring suggests are currently growing and which will accelerate further still. We are currently quantifying the impact; however, it is reasonable to assume that without further financial support many companies will become insolvent.”

The CLC’s wish list includes the extension of the stamp duty holiday on property transactions, the withdrawal of reverse charge VAT, the extension of employer apprenticeship incentives and apprenticeship levy flexibility.

But top of the list of measures advocated by the CLC is a national retrofit strategy.

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Andy Mitchell writes: “The CLC calls on government to build on its £9.2bn national retrofit programme to create a long-term plan for carbon reduction for homes. For properties not covered by the programme, we would welcome a ‘Help to Fix’ interest-free loan scheme, predicated on energy efficiency, to improve our existing housing stock. Training should be at the centre of any future national retrofit interventions, to equip the construction workforce with the skills needed to meet net zero ambitions. It will be essential that government work with industry to ensure this, including through clear commitments in the next spending review.”

The CLC also wants incentives for the commercial property sector.

“Now would seem an ideal time to incentivise such works, as businesses adapt to new ways of working, the need to repurpose business space and play their part in stimulating the economy.”

It suggests that there are several ways in which the capital allowances regime could be used to do this, including a new ‘green pool’ that expedites relief for works that enhance the sustainability credentials of a building. The annual investment allowance (AIA) threshold could be held at £1m, rather than reduced to £200,000 as planned – or alternatively, a higher threshold could be targeted to facilitate tax relief on typical retrofitting works. through a ‘green AIA’.

The CLC is also pushing for more money for the Ministry of Housing’s building safety fund, which supports the removal of flammable cladding systems from high-rise buildings.

“With almost 3,000 applications for the building safety fund remediation programme it is clear that there is insufficient funding to ensure that all eligible buildings are remediated,” the CLC writes. “In order to prevent the grant-awarding process from becoming a lottery for residents, we strongly urge an increase in the funding for the BSF programme to cover the remediation of all eligible buildings and other matters.”

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