Spring Budget 2021: What it means for construction, infrastructure and energy
The good news is that official forecasts predict the UK economy will grow 4% this year and get back to its pre-pandemic size six months sooner than previously expected. The Government recognises that investment and innovation in construction, infrastructure and energy will be key to the UK’s economic recovery, enabling the UK to ‘level up’ whilst remaining committed to its transition to net-zero carbon emissions by 2030.
Here are the key takeaways from the Spring Budget 2021 insofar as construction, infrastructure and energy are concerned:
UK Infrastructure Bank
The creation of the UK’s first ever Infrastructure Bank, to be located in Leeds, which will have an initial capitalisation of £12 billion, to support at least £40 billion of total investment in infrastructure.
The bank will invest across the UK in public and private sector projects to help finance the ‘green industrial revolution’.
New Towns Deals & Regional Investment Projects
The Chancellor announced investment plans for more than £1 billion for 45 New Town “deals” designed to create jobs and drive growth across the country.
He also revealed specific city growth deals in Scotland and Wales, including funding for the Holyhead Hydrogen Hub, the Global Centre of Rail Excellence in Neath Port Talbot, the Aberdeen Energy Transition Zone, and the Global Underwater Hub and the North Sea Transition Deal.
Offshore Wind and Port Infrastructure
To help progress the Prime Minister’s ambitious Ten Point Plan for a green industrial revolution, there will be investment in new port infrastructure to support the next generation of offshore wind projects in Teesside and Humberside.
Freeports - "special economic zones with different rules to make it easier and cheaper to do business" - will be located at East Midlands Airport, Felixstowe and Harwich, the Humber region, the Liverpool City Region, Plymouth, Solent, Thames and Teesside.
The freeports will have simpler planning, cheaper customs - with favourable tariffs, VAT or duties, and lower taxes - with tax breaks to encourage construction, private investment and job creation. The Chancellor also stated the freeports will receive significant infrastructure funding.
Green Savings Bonds
UK savers will be given the chance to support green projects. The Chancellor confirmed the Government’s intention to position the City of London as the "global leader for voluntary, high-quality carbon offset markets".
The UK will issue at least £15 billion in green bonds to help finance the transition to net-zero and the government will launch the world’s first sovereign green savings bond for retail investors.
The Chancellor explained: "Underpinning all of this will be an updated monetary policy remit for the Bank of England. It reaffirms their two per cent inflation target. But now, it will also reflect the importance of environmental sustainability and the transition to net zero."
“Super Deduction” for Business Investment
Companies will be eligible for a 130% "super deduction" on capital invested, in a bold move to help firms get back on their feet.
The Chancellor gave the specific example of a construction company investing £10million in new equipment now being able to reduce their taxable income in the year in which they invest by £13million under the new “super deduction” regime.
The Chancellor called it “the biggest business tax cut in modern British history.”
Apprenticeships & Training
Any employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, regardless of the apprentice’s age.
This is on top of the £1,000 payment already provided for new apprentices aged 16 to 18 and those under 25 with an Education, Health and Care Plan, meaning that some employers could receive £4,000 in total.
The Chancellor also confirmed that the Government will provide an additional £126 million in England for “high quality” work placements and training for 16- to 24-year-olds in the 2021/22 academic year.
This is hoped to attract a further 40,000 traineeship starts next year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.
Help to Grow Management Training
130,000 small and medium sized businesses will be supported through the new Help to Grow scheme, providing the digital and management tools needed to innovate, grow and help drive recovery. The Government will contribute 90% of costs to training “to learn more, make more and grow more”.
Extension to the Furlough Scheme
The Chancellor confirmed that furlough will continue until September, with no change for employees. Employees will continue to receive 80% of their salary. From July, businesses will need to contribute between 10% and 20%. The construction industry as a whole has claimed more than £4.16 billion in furlough cash since the start of the scheme.
Further Support for the Self-Employed
The Self-Employment Income Support Scheme (SEISS) is set to continue through to the end of September in the form of a fourth and fifth grant.
SEISS' fourth grant may be available to 600,000 people more than the third grant, with individuals having to file a 2019-20 Self Assessment tax return to be eligible for this grant, offering the potential for the newly self-employed to qualify.
Increase in the National Minimum Wage and National Living Wage
Basic rate workers will get a 2.2% increase from April, the Chancellor said, with the National Living Wage rising to £8.91 an hour - including all 23-year-old workers for the first time.
For the first time, the Government's highest rate will also include those aged 23 and over - workers who previously fell under the lower wage bracket.
This means 23 and 24-year-olds who are currently on £8.20 an hour will see their pay jump by 71p to £8.91 next month.
The Chancellor promised to “radically reduce bureaucracy” to enable companies to hire highly skilled foreign workers.
This budget represents an exciting opportunity for the construction and engineering sector as whole, particularly large-scale infrastructure and green energy projects, which have been duly recognised by the Government as crucial to the UK’s economic recovery going forward .