AUTUMN STATEMENT SPECIAL FOR MEMBERS ONLY 23 November 2016
November 24 2016 Geen categorie
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AUTUMN STATEMENT SPECIAL FOR MEMBERS ONLY 23 November 2016
24/11/2016
Please note this is our initial analysis of today’s Autumn Statement & Spending Review.
Any subsequent issues will be reported in Friday’s Weekly Notes
OVERVIEW
Dr Diana Montgomery, Chief Executive of the Construction Products Association, commented on today’s Autumn Statement: “While many of the points raised by the Chancellor today were trailed during the party conference, we welcome the government’s commitment to infrastructure, innovation and housing investment as necessary components of a strong, resilient economy whilst helping to address the challenge of lagging productivity.
“We were pleased with the announcement of a National Productivity Investment Fund, with £23 billion over the next five years to be spent on infrastructure and innovation. The government has been clear with its ambition to ensure that R&D spending in the UK should lead to the development and production of products here too, all of which speaks to the work already undertaken by our manufacturers. Highlights of this fund include:
• £1.1billion for improved transportation networks in England
• £220 million for solutions to traffic pinch-points
• £450 million for digital signalling
• Over £1bn more for the UK’s digital infrastructure, plus 100% business rate relief on new fibre optic infrastructure
“We were also pleased to hear the Chancellor announce that the Chief Secretary to the Treasury will chair a new ministerial group that will oversee the delivery of priority infrastructure projects. As a sector we have applauded government announcements on capital investment in infrastructure but currently we are not seeing this delivery on the ground. We hope this group, along with the Infrastructure Projects Authority review, will ensure delivery alongside identifying ways in which government, working with construction product manufacturers and distributors, can improve the innovation, quality and performance of the UK’s infrastructure.
“In terms of housing, we appreciate the commitment to £3.7 billion of new spending on housing projects in England. Approximately £2.3 billion of this will be spent on the infrastructure related to housing developments such as roads and unlocking public land, and £1.4 billion will made to deliver 40,000 additional affordable homes. The critical focus of this must be how the government supports housing delivery through SME house builders and what is done to facilitate sustainable methods of construction.
“Overall, we were encouraged with the announcements made today and the positive impact that the delivery of these will have on UK construction product manufacturers and distributors. We have discussed many of these policy measures directly with government over the past 12 months and they will help the UK prepare for the challenges ahead through this inevitable period of uncertainty. The key, however, will be how these announcements feed through to delivery on the ground and our members will only have the confidence to make further investments when this is the case.”
ECONOMIC AND FISCAL OVERVIEW
The Office for Budget Responsibility (OBR) has published its latest forecasts on the economic and fiscal outlook.
http://cdn.budgetresponsibility.org.uk/Nov2016EFO.pdf
The OBR expects that the UK economy will grow 2.1% in 2016, down from 2.0% projected in the March Budget. Similarly, the OBR’s forecasts for GDP growth in 2017 and 2018 have been revised down to 1.4% and 1.7% from 2.2% and 2.1%, respectively. The downward revisions to near-term growth reflect weaker business investment amid Brexit-related uncertainty and lower consumer spending as higher inflation dents real income growth. In 2019 and 2020, GDP growth of 2.1% is expected, unchanged from projections released alongside the March Budget. Furthermore, the OBR projects GDP growth of 2.0% in 2021.
Inflation expectations for this year have remained unchanged from the March publication at 0.7%. In 2017 and 2018, inflation is forecast at 2.3% and 2.5%, up from 1.6% and 2.0% respectively anticipated in the March forecast. The revisions to the forecast for the next two years reflect the pass-through of the recent fall in Sterling to import prices. As a result, CPI inflation is expected to remain above the Bank of England’s 2% target until 2020.
Business investment is forecast to fall 2.2% in 2016, down from an increase of 2.6% anticipated in the March publication, owing to the downward impact of uncertainty created by the EU referendum. In 2017, the OBR expects a further fall of 0.3% as continued uncertainty post-referendum leads firms to delay investments. This is a downward revision from the 6.1% growth forecast in the March publication. In 2018, business investment is expected to return to growth and increase 4.1% and a further 5.3% in 2019, although this reflects a downward revision from the March forecast.
Public sector net borrowing is estimated to have totalled £68.2 billion during the 2016/17 financial year, an upward revision from £55.5 billion expected in the March forecast. Furthermore, a surplus is no longer expected over this parliament. Total public sector net debt as a percentage of GDP is expected at 87.3% in 2016/17 up from 82.6% in the March forecast and is set to peak at 90.2% of GDP in 2017/18, before declining in each year thereafter to 84.8% in 2020/21.
Industry and sector policies
The government made a series of new announcements relevant to businesses and industry. These include:
- A relaxation on affordable housing grant funding in the Affordable Homes Programme for 2016-2021 to allow providers to deliver homes for affordable rent, as well as low cost ownership and shared ownership.
- The government will fund an extension to the pilot of the Right to Buy for housing association tenants on a regional basis. This is expected to enable over 3,000 tenants to purchase their home.
- The Autumn Statement recommits to the UK Guarantees Scheme, and extends it beyond the life of this Parliament, to at least 2026. The UK Guarantees Scheme has to date issued 9 guarantees that have delivered £1.8 billion of Treasury-backed infrastructure bonds and loans, supporting over £4 billion worth of investment. The government is working with industry to understand the demand for construction-only guarantees.
- In 2017, the government will develop a new pipeline of projects that are suitable for delivery through the PF2 Public Private Partnership scheme.
- The Chief Secretary to the Treasury will chair a new ministerial group that will oversee the delivery of priority infrastructure projects.
- The government will provide additional support through UK Export Finance (UKEF) to ensure that no viable UK export should fail for lack of finance or insurance from the private sector.
- Additional resource will be provided to strengthen trade policy capability in the Department for International Trade (DIT) and Foreign and Commonwealth Office, totalling £26 million a year by 2019-20. There will also be additional resource of up to £51 million in 2016-17 for the Department for Exiting the European Union to support the re-negotiation of the UK’s relationship with the European Union. Up to £94 million a year of additional resource will be allocated from 2017-18 until the UK’s exit is complete. In total this will mean up to £412 million of additional funding over the course of this Parliament.
- HM Treasury will lead a review to identify barriers to access to long-term finance for growing firms, supported by an advisory panel led by Sir Damon Buffini. The British Business Bank will also invest an additional £400 million in venture capital funds to unlock up to £1 billion of new investment in innovative firms planning to scale up.
- The government will provide £13 million to support firms’ plans to improve their management skills by implementing Sir Charlie Mayfield’s review of business productivity.
- The government will increase the National Living Wage (NLW) by 4.2% from £7.20 to £7.50 from April 2017.
- Changes to the National Minimum Wage rates (which were last increased in October 2016) will apply from April 2017, including: increasing the rate for 21 to 24 year olds from £6.95 to £7.05 per hour; increasing the rate for 18 to 20 year olds from £5.55 to £5.60 per hour; increasing the rate for 16 to 17 year olds from £4.00 to £4.05 per hour; increasing the rate for apprentices from £3.40 to £3.50 per hour.
- The government will invest an additional £4.3 million per year to strengthen National Minimum Wage enforcement.
- To provide certainty to businesses, the government confirms it is maintaining the cap on Carbon Price Support rates at £18 t/CO2 , uprating this with inflation in 2020-21. The government will continue to consider the appropriate mechanism for determining the carbon price in the 2020s.
- As recommended by the Office of Tax Simplification (OTS), the National Insurance secondary (employer) threshold and the National Insurance primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying National Insurance on weekly earnings above £157. This aims to simplify the payment of National Insurance for employers.
- The government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company.
- Fuel duty will be frozen for a seventh consecutive year at 57.95 pence per litre for 2017/18.
- The government will double rural business rate relief to 100% from 1 April 2017.
- The standard rate of insurance premium tax will rise to 12% from 1 June 2017.
- The government has decided not to implement Pay to Stay, under which local authority tenants with taxable incomes over £31,000 (or £40,000 in London) would have been required to pay a market, or near market, rent.
- A £23 billion National Productivity Investment Fund (NPIF), which refers to increased capital investment in housing, transport, research and development (R&D), and digital communications between 2017/18 and 2021/22. It aims to accelerate new housing supply, tackle congestion on roads and support the market to roll out full-fibre connections and future 5G communications.
Investment measures
- A Housing Infrastructure Fund of £2.3 billion (part of the NPIF) to be allocated to local government on a competitive basis, which will provide infrastructure targeted at unlocking new private house building in the areas where housing need is greatest. This aims to deliver up to 100,000 new homes.
- The government confirmed the Greater London Authority’s (GLA) affordable housing settlement, under which the GLA will receive £3.15 billion to deliver over 90,000 housing starts by 2020/21.
- For the £2 billion of funding for the previously-announced Accelerated Construction Fund (part of the NPIF), £1.7 billion will be invested by 2020/21 to speed up house building on public sector land in England through partnerships with private sector developers.
- £1.4 billion funding in capital grants for 40,000 new affordable homes between 2016 and 2021(part of the NPIF).
- Government investment in the areas the National Infrastructure Commission covers will rise to over 1% of GDP by 2020/21 (0.8% of GDP currently).
- £27 million in development funding for an Oxford-Cambridge expressway (part of the NPIF).
- £1.1 billion by 2020/21(part of the NPIF) in new funding to relieve congestion and deliver upgrades on local roads and public transport networks. On strategic roads, an extra £220 million will be invested to tackle key pinch-points. The government will recommit to the National Roads Fund announced at Summer Budget 2015.
- Investment of £1 billion by 2020/21, including £740 million (part of the NPIF), targeted at supporting the roll out of full-fibre broadband connections and future 5G communications.
- The government will invest £170 million in flood defence and resilience measures. £20 million of this investment will be for new flood defence schemes, £50 million for rail resilience projects, including Dawlish, and £100 million to improve the resilience of roads to flooding (part of the NPIF).
- Additional investment of £2 billion a year by the end of this Parliament for research and development (part of the NPIF), including an Industrial Strategy Challenge Fund and funding to increase research capacity and business innovation.
- The government will award £1.8 billion to Local Enterprise Partnerships (LEPs) across England through a third round of Growth Deals. £556 million of this will go to the North of England, £392 million to LEPs in the Midlands, £151 million to the East of England, £492 million to London and the South East, and £191 million to the South West.
- The government will provide £50 million of new capital funding to support the expansion of existing grammar schools in each year from 2017/18, and has set out proposals for further reforms in the consultation document ‘Schools that Work for Everyone’.
- The Autumn Statement confirms the government’s contribution of up to £15 million towards the costs of hosting the 2021 Rugby League World Cup, and £10 million towards legacy infrastructure. It also confirms the government’s contribution of £9 million towards the cost of hosting the Cycling Road World Championships in Yorkshire in 2019, and £15 million towards a legacy fund to pay for cycling infrastructure.
The government will also publish a White Paper by the end of the year, detailing its plans for delivering one million new homes by 2020.
END